NEW YORK - Further evidence that the economic recovery will be a slow and bumpy one emerged yesterday with reports that service-sector activity and retail sales unexpectedly shrank in November as consumers held back on purchases.
The government did report one positive sign: New jobless claims dropped for a fifth straight week. But productivity gains in the third quarter showed that employers are managing to squeeze more work out of fewer workers. That's an ominous sign for the nearly 16 million Americans looking for jobs - and for many others who fear losing theirs.
The government is expected to report today that employers cut 130,000 jobs in November and that the unemployment rate will remain at 10.2 percent. Companies have been laying off fewer workers. But they have yet to increase hiring, and the jobless rate is expected to expected to keep climbing into next year.
Meanwhile, the Institute for Supply Management's service-sector index dropped to 48.7 from 50.6 in October. Analysts polled by Thomson Reuters had expected a level of 51.1. Any reading below 50 signals contraction. The service sector had begun growing in September for the first time in 13 months.
The measure tracks more than 80 percent of the country's eco-nomic activity, including such diverse industries as health care, retail, financial services, and transportation.
The trade group said employment shrank for the 22nd time in the last 23 months, albeit at a slightly slower pace.
The report "underscores the difficult conditions facing the overwhelming majority of U.S. businesses," said Josh Shapiro, economist at research firm MFR Inc.
The nation's retailers suffered last month as a modestly positive start to the holiday shopping season couldn't offset weak spending the rest of the month.
After posting two consecutive sales gains after more than a year of declines, merchants posted an unexpected 0.3 percent decrease for November, compared with a year ago. Last year at this time, business had plummeted to historic lows as spooked shoppers clamped down after the financial meltdown.
Employers, though, are cutting fewer jobs. Newly laid-off workers seeking unemployment benefits unexpectedly fell for the fifth straight week, the Labor Department said. First-time claims for unemployment insurance dropped by 5,000 to a seasonally adjusted 457,000, the lowest total since the week of Sept. 6, 2008.
The continued job cuts amid slowly growing business means employers must squeeze more out of the workers they have. The government also said productivity surged in the third quarter by the largest amount in six years, while labor costs fell.