US recovery broadens on brisk services growth

The robust US economic rebound appears to be broadening, with reports Wednesday showing the services sector expanding briskly in October and adding jobs, while business spent more on factory goods in September.

The Institute for Supply Management said its index of service sector businesses rose to 64.7 in October from 63.3 in September -- just shy of the record level hit in July and August -- and beating forecasts.

Any reading above 50 suggests expansion in the services sector, which comprises about 80 per cent of the economy and includes everything from travel agencies to restaurants and construction.

More importantly, the employment component of the ISM index jumped to its highest level in there years, rising to 52.9 from 49.1 suggesting the economy's recent stellar performance is leading to more jobs.

"Particularly encouraging is the employment number, which we have been hoping would turn things around this quarter," said Kurt Karl, head of economic research at reinsurer Swiss Re in New York. He said the data was "positive, positive, positive."

Other ISM figures showed new orders accelerating from an already high level, suggesting the strong pace of growth will continue in coming months.

The ISM reading came just two days before the Labor Department reports its closely watched payrolls data for October, which is expected to show a gain of 55,000 after an increase of 57,000 in September.

Still, such job gains are not big enough to bring down the unemployment rate from 6.1 per cent.

Many economists believe repeated monthly employment increases of 200,000 or more are needed before the Federal Reserve would be confident of the economic recovery and consider lifting its target funds rate from a 45-year low of 1 per cent.

Stock gauges looked past the data and ended almost unchanged. The blue-chip Dow Jones industrial average. DJI feel 0.18 per cent to end at 9,820.83, while the tech-laden Nasdaq Composite Index inched up 0.07 per cent to end at 1,959.37, and the broad Standard & Poor's 500 index dipped 0.14 per cent to 1,051.81.