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U.S. service activity up, job growth slows

Millie Brown, a cook and waitress at Buch's

Millie Brown, a cook and waitress at Buch's truck stop, serves a breakfast, in Steubenville, Ohio. U.S. service companies, which employ nearly 90 percent of the work force, grew in September at the fastest pace since March. The growth was driven by sharp increases in current and future sales. (Sept. 27, 2012) Photo Credit: AP

U.S. service companies grew in September at the fastest pace in six months, helped by a sharp increase in customer demand.

The Institute for Supply Management trade group said Wednesday that its index of nonmanufacturing activity rose to 55.1, up from 53.7 in August. A reading above 50 indicates expansion.

The report measures growth at businesses that employ roughly 90 percent of the U.S. workforce, from retail and construction companies to health care and financial services firms. The service sector has grown for 33 straight months.

In September the survey noted that consumer demand rose sharply, which could help lift economic growth from its tepid pace and ultimately lead to more hiring.

Still, the report noted that job growth slowed at service firms last month.

"Overall, this is an encouraging survey," said Paul Dales, senior U.S. economist at Capital Economics. "But more than a couple of stronger surveys will be needed to conclude that the economic outlook has brightened dramatically."

A separate report Wednesday from payroll processor ADP said private employers added 162,000 jobs last month. Such modest hiring is generally too little to rapidly lower the unemployment rate. The ADP survey has diverged sharply from the government's more closely watched employment report.

The ISM survey showed service companies kept adding jobs in September, although at a slower pace. A measure of hiring in the survey fell to 51.1, down from 53.8 in August.

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