US companies added staff in November at the fastest pace in a year and worker productivity rose at the strongest rate in four years in the third quarter. This is according to data released today that lifted some recent economic gloom.
However, separate numbers showing that growth in the vast service sector slipped last month, along with a government report saying the US economy was at an 'elevated' risk of recession, suggested growth may still be struggling.
But the unexpectedly robust hiring data held the most sway today, suggesting turmoil in housing and financial markets may not be as damaging as feared and that the Federal Reserve may not need to cut interest rates aggressively next week.
US private employers added 189,000 jobs last month, according to ADP Employer Services. The number far outpaced analysts' median expectation of a reading of 50,000, and had economists scrambling to raise their forecasts for the government's non-farm payrolls data to be released on Friday.
Residential construction and financial activities, the sectors hit hardest by troubles in risky sub-prime mortgages, showed signs of stabilising. That prompted analysts to speculate a global credit crisis may not be hitting economic growth as hard as first expected.
Revised data from the government also showed US worker productivity in the third quarter rose at a 6.3% annualised pace, its biggest increase since the third quarter of 2003 and above the government's initial estimate of a 4.9% rise in the quarter.
Unit labour costs, a gauge of inflation and profit pressures which is closely scrutinized by the Fed, was revised to show a 2% drop in the third quarter for the largest decline in four years. These costs had been forecast to decline by 1%, from an initially reported 0.2% fall.
Meanwhile, a report from the Congressional Budget Office concluded that housing woes, faltering confidence in financial markets and high oil prices had the US at an above-average risk of recession.
And a separate report on the service sector, which makes up about 80% of the US economy, showed growth slowed in November. The Institute for Supply Management said its services index fell to 54.1 last month, its lowest reading since March, from 55.8 in October.
