South-Western College Publishing - Economics  
Service Sector Showing Growth
Subject Service-Sector Employment
Topic Employment, Unemployment, and Inflation
Key Words Service-Sector, Employment, and Income
News Story

The service-sector comprises many firms and is an important source of employment and income for the national economy. A survey of the industry revealed a significant increase in employment in October. Conducted by The Institute of Supply Management, the survey questioned 370 purchasing and supply managers. The index, which covers services, increased to 64.7 in October, rising from 63.3 in September. Nineteen percent of respondents indicated that employment was higher in October than September, 65 percent reported it unchanged, and 16 percent reported it lower.

The institute's overall index for employment, including all sectors, was a seasonally adjusted 52.9, the highest since November 2000. Readings above 50 in either index indicate expansion; a number less than 50 would indicate contraction.

This is good news for the economy because the economic recovery has not previously produced a sustained increase in new jobs. During a recovery, if enough new jobs were not created most analysts would expect the recovery to wane.

The survey revealed construction projects, store expansions and slightly higher workloads as major reasons for the new jobs. Sectors showing the highest rates of employment gain included entertainment, health, communications, and banking.

"This report is signaling a clear pickup in employment." Said Jim O'Sullivan, economist with UBS in Stamford, Connecticut. O'Sullivan noted that his bank believes 125,000 new jobs were added to the economy in October.

The service sector is the economy's biggest employer, and service activity, which includes banking, tourism, entertainment and more, makes up about 80 percent of the total economy.

(Updated January, 2004)


Discuss why new jobs are important to sustain a recovery.

2. Use the Statistical Abstract of the United States to determine how many workers are employed in the service-sector.
3. Using any source available, find the average wage of a service-sector employee. How does this average wage compare to the average wage of a manufacturing-sector worker?
Source Jon E. Hilsenarath and Michael S. Derby, "More Jobs Seen In Service Sector As Output Grows," The Wall Street Journal, November 6, 2003.

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