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Services Employment Index Shrinks for First Time in 2 Years

By Justin Loiseau - Mar 5, 2014 at 3:29PM

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ISM's new February report is out and services aren't living up to expectations.

The services sector improved for the 49th consecutive month, but at a slower pace, according to the Institute for Supply Management's February Report on Business released today. 

The Institute's Non-Manufacturing Index registered an overall 51.6% rating, down from January's 54% and below analyst expectations of 53.5%. An above-50 rating denotes growth, while less than 50 implies contraction.

ISM Non-Manufacturing Index Chart

ISM Non-Manufacturing Index data by YCharts. 

Diving deeper into index components, business activity fell 1.7 points to 54.6%, while new orders edged up 0.4 percentage points to 51.3%. While above-50% new orders point to growth ahead, a sharp 8.9-point drop in the employment index to a weak 47.5% points to less confidence from employers about the road ahead. This is the first time in more than two years that the employment index has contracted.

Anthony Nieves, head of ISM's services survey, said comments from businesses indicate that snow and freezing temperatures held back employment.

The 10 services industries reported growth in February, led by "other services," which includes everything from religious promotion to dry-cleaning to dating services. Eight industries reported contractions, led by mining, entertainment, and real estate.

-- Material from The Associated Press was used in this report.

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