Service Market Takes Plunge

The service sector saw a significant drop in March, ending more than a year of gradual growth.

NEW YORK - Activity in the service sector contracted in March on war worries, ending 13 straight months of growth, a report released Thursday said.

The Institute for Supply Management reported that its non-manufacturing index fell to 47.9 last month from 53.9 in February. It was 54.5 in January.

The non-manufacturing index is comprised mostly of services, which make up two-thirds of economic output. A reading above 50 indicates growth in the service sector, while anything under 50 denotes a pullback in business.

Economists had expected the index to fall but only to 52.5. The ISM service-sector report comes amid a slew of other data showing widespread economic weakness, largely due to either prewar worries or the actual conflict.

On Tuesday, the ISM's manufacturing activity index for March fell much more than economists had anticipated, indicating a slowdown at some of the nation's factories on prewar jitters.

The ISM said war worries were key in pushing the overall service-sector index lower as well. It noted survey respondents made comments like "the current economic environment and political instability from the impending hostilities affect our business globally." Others said they were "very cautious."

The ISM non-manufacturing index's components were broadly weak. The new orders index for March was 47.7, versus 53.0 the month before.

LABOR MARKET WEAK. The number of Americans seeking unemployment benefits last week reached the highest level in nearly a year. New U.S. jobless claims jumped to 445,000, the highest since April last year, the government said on Thursday, offering little hope for a turnaround in the grim labor market just a day before the March payrolls report.

The employment index was 47.9, from 49 the month before, marking two straight months of contraction, or a decline in service-sector jobs. The government will report on the national employment situation on Friday, with figures likely to confirm a tough job market. The Labor Department reported Thursday that weekly unemployment claims jumped to an 11-month high.

Meanwhile, price pressures remained a factor for service-sector businesses, as commodity price increases pushed the prices index to 62 after 60.9 in February and 57 in January.

The author is Managing Editor for Pest Control Technology magazine and can be reached at bharbison@pctonline.com.