U.S. Service Sector Shows Continued Growth

The service sector expanded in April according to data released Wednesday by the Institute for Supply Management, as business activity grew at the strongest pace in four years.

The ISM said that its service sector index had a reading of 55.4 in April, flat compared to the prior month, and indicted the fourth consecutive month of growth. Economists had expected a higher reading of 56. A level above 50 indicates growth for the index.

The service sector makes up 80 percent of jobs in the U.S., including areas such as financial services, health care and retail, and during the economic recovery has lagged behind the smaller manufacturing sector.

The ISM indicated in its reports that 14 of 18 industries included in the index showed expansion in April, led by arts and entertainment, real estate, the information sector, agriculture, and management.

The four industries that contracted last month included utilities, education, health care and social services, and professional and scientific services.

The measure of business activity from the ISM showed a reading of 60.3, which was the strongest pace of expansion since April 2006, while the measure of new order that projects future business remained high as well during April.

The service sector is receiving strength from retail sales, as consumers that had stayed away from spending during the recession are returning to shopping amid the recovery. However, businesses indicated that they are still remaining cautious about hiring additional workers.

The ISM report came before the nonfarm payroll data that is set to be released Friday from the Bureau of Labor Statistics. The ADP private-sector jobs report released earlier on Wednesday indicted that 32,000 jobs were added last month.