The U.S. services sector grew at a moderately faster pace in August, but the crowd’s not paying attention. The better-than-expected rise in the ISM’s non-manufacturing index is taking a back seat to Friday’s news of flat job growth and renewed fears of mounting economic challenges in Europe and the Continent’s ongoing push for fiscal and monetary austerity. Focusing on the negative isn’t surprising, but today’s ISM report keeps hope alive, if only slightly, that the problems in the U.S. will bring a mixed bag of macro results rather than an outright recession.

The news from the Institute for Supply Management is no silver bullet, but it’s hardly irrelevant. Why? It could have been worse. The fact that the numbers were ok is enouraging because the services sector is where the action is for the U.S. economy. Something on the order of four of every five workers draw paychecks from companies in the services economy. The manufacturing sector may generate all the buzz in economic analysis, but in terms of dollars and jobs the real story resides elsewhere.
The ISM’s composite services index was 53.3 in August, up from 52.7 in July, the 25th consecutive month of growth. For the moment, that’s meaningless in the markets, where risk aversion is the only game in town once again. Perhaps everyone’s noticing that the employment index component in the services report slipped last month for the second month running. The optimistic interpretation is that we’re facing a jobless recovery. Cynics will argue that we’ve suffered no less all along.
In fact, we’ve been in a recovery with below-average job growth. Will that be replaced by a true period of jobless growth? Maybe the better question is deciding how much more of a slowdown the economy can endure without tipping over into an explicit recession? Assuming, of course, such razor-thin distinctions are even possible or relevant.