Services Sector Beats Expectations In November, But Job Vacancies Take A Tumble, Send Mixed Signals

Activity in the service sector experienced a surprising uptick in November, beating economists’ expectations and quelling fears of an ongoing economic slowdown.

However, the number of job openings substantially dropped from 9.3 million in September to 8.733 million in October, raising concerns about a cooling labor market leading up to the November jobs report scheduled for release this Friday.

Tuesday’s Economic Data: What You Need To Know

• The Institute for Supply Management (ISM) Services PMI rose from 51.8 to 52.7 in November, beating expectations of 52.
  
• A significant portion of the improvement can be attributed to the Business Activity Index, which registered at 55.1, marking a 1-percentage point increase compared to October’s reading of 54.1. Other subindices experiencing a monthly growth were supplier deliveries, inventories, new export orders and inventory sentiment.
  
• Anthony Nieves, chair of the ISM Services Business Survey Committee, noted that the services sector experienced slight growth in November due to increased business activity and minor employment gains. Respondents’ comments varied based on company and industry, with ongoing concerns revolving around inflation, interest rates, and geopolitical events. Additionally, challenges in employment were attributed to rising labor costs and labor shortages.
  
• The Bureau of Labor Statistics reported on Tuesday that the number of job openings decreased from 9.35 million in September to 8.733 million in October. Economists had anticipated an increase to 9.55 million. This drop marks the lowest level of job vacancies since the reopening of the US economy in Q1 2021.
  
• During the month, job openings declined in the health care and social assistance sector by 236,000, in finance and insurance by 168,000, and in real estate and rental and leasing by 49,000. However, there was an increase in job openings in the information sector, with a gain of 39,000.

Market Reactions

Following the data release, the U.S. dollar experienced a modestly negative response, with the DXY index initially dropping by 0.2% but later recovering some of those losses.

Long-term Treasury bonds, as indicated by the iShares 20+ Year Treasury Bond ETF TLT, extended their rally by adding 0.4% to reach a 1.5% gain for the day.

Gold, monitored through the SPDR Gold Trust GLD, initially surged before eventually retracing all of its gains.

Stocks, represented by the SPDR S&P 500 ETF Trust SPY, saw a slight uptick of 0.1%.

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