Crescenzi: GDP Data—Service Sector Could Boost Jobs

The rebound in the U.S. economy until the third quarterwas concentrated in the goods-producing sector of the economy, something quite evident in data on personal spending on durable goods, particularly compared to data for spending on services. Given the fact that the U.S. economy is a service-oriented economy, the composition of consumer spending had therefore been skewed unfavorably in terms of what is best for job growth.

Recent data suggest this condition might be changing, and if it lasts it would likely contribute to acceleration in monthly payroll growth—it probably already has.

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I noted near a month agothat the advance estimate on GDP showed acceleration in personal spending on services, increasing to a 2.5 percent pace in the third quarter, the best showing since the fourth quarter of 2006.

The figure was kept unchanged in today’s revised data.

The improvement in the service sector is important and vital to job growth given that the U.S. is a service-oriented economy: Of the 130 million employed in the U.S., 112 million are employed in the service-producing sector. Gains in the service sector are probably already boosting job creation; payroll growth has averaged 133k per month over the past four months and jobless claims have reached a 2-year low. New data on personal spending on services will be released tomorrow for the month of October.

Acceleration in personal spending on services will add a new element of torque to the U.S. economy that will join with gains in industrial output to keep the U.S. economy from weakening meaningfully in the time ahead. Even if robust growth is not in the cards, he U.S. economy in 2011 looks set to at least muddle through its long-term secular problems, which is a positive for for risk assets.

Tony Crescenzi is Senior VP, Strategist, Portfolio Manager Pimco. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the author of "Investing from the Top Down," "The Strategic Bond Investor," and co-author of the 1200-page book "The Money Market."