Service sector expanded at slightly slower pace in September

10/5/2011

WASHINGTON — Service firms that employ 90 percent of the U.S. work force expanded at a slightly slower pace in September than the previous month.

Meager pay increases and higher costs for food and gas have forced Americans to spend more carefully. The decline in spending is hurting the service industry, which covers a range of businesses from hotels and restaurants to financial firms and retailers.

The Institute for Supply Management said Wednesday that its service sector index dipped to 53 from 53.3 in August. Any reading above 50 indicates expansion for the sector. A measure of employment fell below 50, suggesting firms cut staff last month.

The index reached a five-year high of 59.7 in February. It has weakened consistently since. In July, it fell to its lowest point level in 17 months.

Federal Reserve Chairman Ben Bernanke said Tuesday that the economic recovery "is close to faltering." Bernanke says that the economy is growing more slowly than the Federal Reserve had expected and that the biggest factor depressing consumer confidence is poor job growth.

Employers added no net jobs in August, the weakest month of hiring in nearly a year. The unemployment rate has been at or above 9 percent for all but two months since the recession officially ended in June 2009.

The government releases the September jobs report on Friday. Economists expect the economy added only 56,000 jobs last month. That's not enough to lower the unemployment rate, which is expected to stay at 9.1 percent for a third straight month.

The overall economy is expanding, but at such a slow pace that some economists fear it could fall back into recession. Several analysts have put the risk of a recession as high as 40 percent.