U.S. ISM Services Activity, Employment Gauges Downshift Abruptly

(Bloomberg) -- Measures of business activity and employment at U.S. services contracted in March, an abrupt reversal from solid growth the previous month and evidence of the swift economic carnage dealt by the national health crisis.

The Institute for Supply Management said Friday its gauge of business activity at non-manufacturers, which parallels the ISM’s factory production index, tumbled 9.8 points to 48. The measure of employment at services, which include restaurants and retailers that bore the initial brunt of the virus-related business closures, lost 8.6 points to 47. Readings below 50 indicate contraction, and both were the largest monthly declines since 2008.

A Labor Department report earlier today showed employment slumped 701,000 in March, the most since 2009, while the jobless rate jumped to 4.4% -- the highest since 2017. Declines in payrolls in leisure and hospitality and accommodation and food services nearly wiped out about two years of job growth in each of those industries.

The ISM’s headline non-manufacturing measure fell to 52.5 from 57.3 a month earlier, the biggest decline since 2008. While March was well above the median forecast in a Bloomberg survey, the figure was propped up by considerably longer lead times. Similar to the group’s manufacturing report, the supplier deliveries index for service providers surged by the most since 1997 as the Covid-19 outbreak resulted in supply-chain disruptions.

The median forecast in a Bloomberg survey of economists called for a decline to 43 in the ISM non-manufacturing index.

Orders growth also weakened significantly in March, with the ISM’s measure dropping to a nearly four-year low of 52.9 from 63.1. The gauge of non-manufacturer inventories also swung from growth to contraction.

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