Service Sector Ggrows But Other Data Negative


Growth in the U.S. service sector picked up in July but other economic reports have signaled weakening trends in the housing sector, manufacturing and consumer spending. Inquiring minds are reading the AP wire entitled “Service sector grows more quickly in July“:

First, the Service Sector is looking positive:

The Institute for Supply Management said Wednesday its service-sector index rose to 54.3 last month, up from 53.8 in June. Economists had expected a pullback to 53 for July.

Levels above 50 signal growth. July was the seventh straight month of expansion.

The index shows service companies have been expanding every month this year, but at a less robust pace than the manufacturing sector. They are more dependent on consumer spending, which has grown only modestly because unemployment remains near 10 percent.

Unfortunately, other parts are looking so positive:

This summer, other economic reports have signaled weakening trends in the housing sector, manufacturing and consumer spending. The weaker data have triggered fears that the pace of hiring might slow, said Wang. The ISM data also suggest that hiring is “at least holding steady,” he said.

It seems that IT service jobs are picking up:

Some business are finally seeing strong growth return. Cognizant Technology Solutions Corp., which provides consulting and information technology outsourcing, on Tuesday posted big gains in net income and revenue in the second quarter as corporate customers restarted projects that had been on hold during the recession. It said it added 3,200 jobs to its payrolls during the quarter, an increase in its workforce of nearly 4 percent.

It may not be the pretties analogy but IT today is kind of like the auto repair business of yesterday. Computers, like autos, are throughout the economy. And, like autos, computers are vital to the workforce and need to work properly. Because of this, a computer, like its auto counterpart, can only go so long without repairs. This is truly a positive sign that will help the economy.

Of the 18 industries ISM surveyed, 13 reported growth in July, led by real estate and the arts and entertainment sectors. Construction and utilities were the biggest of four industries saying they shrank last month. Companies providing professional and scientific services said they saw no net change in growth.

This shows that there is some growth. It just isn’t going to be enough to get over the second ‘camel’s hump’ of foreclosures that builds through the end of 2011. That drag of foreclosures, the bulge in the snake’s belly (enough animal metaphors?) of commercial loans needing recasting, and the tsunami of higher taxes coming at the end of this year will swamp the already ailing economy.

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