US service companies, which employ nearly 90% 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.
The Institute for Supply Management said today that its index of non-manufacturing activity rose to 55.1, up from 53.7 in August. Any reading above 50 indicates expansion.
The report measures growth in a broad range of businesses from retail and construction companies to health care and financial services firms.
The service sector has grown for 33 months in a row, based on the ISM survey.
The September survey points to a rise in consumer demand, which could help lift economic growth from its tepid pace and ultimately lead to more hiring. A measure of current sales activity jumped to 59.9, up from 55.6 in August. A gauge of new orders also rose to 57.7, up from 53.7 in August.
Stronger growth at service firms coincided with an increase in US factory activity in September.
A separate ISM survey released on Monday showed manufacturing grew last month for the first time in four months, also driven by a sharp jump in new orders. The economy grew at a 1.3% annual rate in the April-June quarter.
Consumer spending drives nearly 70% of economic activity. Service companies kept adding jobs in September, although at a slower pace. A measure of hiring fell to 51.1, down from 53.8 in August.
The service sector has been a key source of job growth this year. Service firms have created an average of 133,000 jobs a month, or 95% of the net jobs added since January.
Still, total job growth has been too weak to significantly lower the unemployment rate, which was 8.1% in August. And many of the new service jobs have been low-paying retail and restaurant positions.
US businesses added 162,000 jobs in September
A private survey shows that US businesses hired fewer workers in September than August, a sign that slow growth may be holding back hiring.
Payroll processor ADP said today that companies added 162,000 jobs last month. That is below August's total of 189,000, which was revised lower.
However, the September increase was better than economists had expected and marks the latest in a string of modest hiring gains reported by the survey.
But the gain is not enough to significantly push down the unemployment rate, which has been above 8% for three and a half years.
About 100,000 new jobs are needed each month just to keep up with the growth of the working-age population. Twice as many are typically needed on a consistent basis to bring unemployment down rapidly.
The report only covers hiring in the private sector and excludes government employment. The Labor Department will offer a more complete picture of September hiring on Friday.
The ADP and government surveys frequently diverge. In August, the government said private companies added 103,000. Economists forecast that the Labor Department report will show employers added 111,000 jobs in September, slightly more than August.
The unemployment rate is expected to move up to 8.2%. In September, services companies added 144,000 jobs, the ADP report said. Manufacturing, construction and other goods-producing industries gained 18,000.
The US economy grew at a 1.3% annual rate in the second quarter, down from 2% in the first quarter and 4.1% in the final three months of last year. Most economists expect growth to stay at about 2% for the rest of this year.
