Ahead of the Bell: US economy-services

WASHINGTON -- U.S. service companies, which employ nearly 90 percent of the workforce, likely grew more slowly in September than August.

Economists expect the Institute for Supply Management non-manufacturing index dipped to 53.5 in September, from 53.7 in August, according to a survey of economists by FactSet.

Any reading above 50 indicates expansion. The ISM, a trade group of purchasing managers, will issue the report at 10 a.m. EDT Wednesday.

The service sector has grown for 32 straight months, based on the ISM survey. The report measures growth in a broad range of businesses, from retail and construction companies to health care and financial services firms.

In August, growth was driven by a jump in hiring. A measure of employment rose to 53.8 from 49.3 in July.

Service companies have been a key source of job growth this year. They have created an average of 133,000 jobs per month, or 95 percent 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 percent in August. And many of the new service jobs have been low-paying retail and restaurant positions.

The government will release the September employment report on Friday. Economists expect it will show the economy added 111,000 jobs in September, up from 96,000 in August. The unemployment rate is expected to tick up to 8.2 percent.

Job growth will feature prominently in Wednesday night's debate between President Barack Obama and GOP challenger Mitt Romney in Denver, the first of three in this year's election. The economy is the top issue on most voters' minds with just five weeks left before Election Day.

Obama is expected to highlight the 5.1 million jobs created by private employers since February 2010. Romney will likely focus on the unemployment rate, which has been above 8 percent for the past three and a half years.

High unemployment and weak wage growth have kept Americans from spending more freely, which has held back growth. Consumer spending drives nearly 70 percent of economic activity.

The economy grew at a meager 1.3 percent annual rate in the April-June quarter. Most economists foresee little strengthening the rest of the year.

Still, there have been some hopeful signs. Cheap loans are encouraging more Americans to buy cars and homes this year, expensive purchases that drive growth. Consumer confidence is rising, as are home prices.

And U.S. factory activity grew in September for the first time in four months, according to the ISM manufacturing index released earlier this week. The growth was driven by an increase in new orders and more jobs.