Growth at U.S. service firms held steady in October and hiring increased. The gains at firms that employ 90 percent of the work force suggest the economy is growing at a modest pace.
The Institute for Supply Management said Thursday that its service sector index dipped slightly to 52.9, from 53 in September. Any reading over 50 indicates expansion. The index covers retailers, financial services firms, hotels and all other non-manufacturing industries.
New orders and order backlogs fell. An index measuring employment rose to 53.3, after falling below 50 the previous month. That's evidence that service firms are adding workers.
The index fell to its lowest level in 17 months in July. But it has ticked up since then.
Despite high unemployment and weak wage growth, Americans spent more in September. That benefits restaurants, hotels, retailers and other services.
Economists worry that consumers won't be able to sustain the growth in spending, largely because their incomes aren't rising as fast. Americans have financed the extra spending by dipping into savings.
The government said the economy expanded at a 2.5 percent annual pace in the July-September quarter, the best quarterly growth in a year.
That's strong enough to calm fears of another recession. Still, growth would have to be nearly twice as high -- consistently -- to make a major dent in the unemployment rate, which has been stuck near 9 percent for more than two years.
The ISM's report comes a day before the government releases its October jobs report. Analysts expect employers added 100,000 net jobs, nearly the same as the 103,000 added in September. The unemployment rate is expected to stay at 9.1 percent for a fourth straight month.
Federal Reserve Chairman Ben Bernanke said Wednesday that growth is likely to be "frustratingly slow," after the Fed sharply lowered its economic projects for the next two years.
The Fed now says the economy will likely expand no more than 1.7 percent for all of 2011. That's down from its June forecast of 2.7 percent to 2.9 percent. And it predicted growth of only 2.5 percent to 2.9 percent next year. In June, the Fed estimated growth of 3.3 percent to 3.7 percent in 2012.
The Fed said it doesn't expect the unemployment rate to be any lower this year. And it sees unemployment averaging 8.6 percent by the end of next year. In June, it had predicted unemployment would drop in 2012 to as low as 7.8 percent.
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