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An increase in private sector hiring eased fears of a renewed slowdown in the US labour market, while the pace of growth in the services sector picked up in September, delivering a dose of economic confidence for Barack Obama before the first presidential debate on Wednesday.

US businesses added 162,000 new jobs in September, according to ADP, the payroll processor. The figure exceeded analysts’ expectation of 140,000.

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However, gains in previous months were revised lower. The August improvement was reduced by 12,000 to 189,000 new jobs while July’s increase was cut by 17,000, resulting in a total 156,000 hires.

The data were released before Friday’s crucial employment report from the labour department, which is expected to reveal that 113,000 jobs were created by government and businesses in September.

A separate report from the Institute for Supply Management showed new orders in the non-manufacturing sector accelerated, even as employment cooled.

ISM’s services index rose to 55.1, the highest since March, from 53.7 last month. This came in above consensus estimates of a level of 53.5. A reading above 50 indicates expansion in the sector.

The forward-looking new orders index jumped to 57.7 from 53.7, but growth in employment eased to 51.1 from 53.8. Exports also waned to 50.5 from 52.

Companies in the services industry, from agriculture to property, have avoided the contraction that their manufacturing counterparts faced in recent month on the back of slowing growth in China, a recession in Europe and uncertainties surrounding the US “fiscal cliff” – tax increases and government spending cuts scheduled for the end of the year.

While ADP’s employment numbers are looked to as an indicator of the government’s non-farm payrolls, the data sometimes diverge. ADP forecast a large gain in August that turned out to be a much smaller advance than expected – only 96,000 jobs were created that month, according to the labour department.

“Unfortunately, the ADP series has not been especially helpful for refining payrolls forecasts,” said Jim O’Sullivan, chief US economist at High Frequency Economics. “It overestimated by 98,000 last month. Over the past two years, misses have ranged from -184,000, with payrolls weaker than ADP, to +116,000, limiting the information value of the data. Government payrolls can also be quite volatile.”

ADP’s monthly employment report is taken from a subset of its business records, which represents roughly 400,000 US businesses and 24m employees in the private sector.

Employment in the service sector expanded by 144,000 in September, down from 175,000 in August, while 18,000 jobs were created in the goods-producing sector.

Within these categories, manufacturing employment rose by 4,000 and the number of construction jobs increased by 10,000, the strongest since March when mild winter weather boosted construction activity.

The financial services sector added 7,000 jobs in September, marking the 14th consecutive monthly gain.

Some economists remained downbeat on the US employment outlook, however.

“The indicators that provide some steer of where the unemployment rate is heading over the next few months supply little evidence that it will dip below 8 per cent,” said Paul Dales, senior US economist at Capital Economics.

“What’s more, we doubt that gross domestic product growth will be strong enough next year to drive the unemployment rate as low as the Federal Reserve hopes.”

Most economists expect growth will stay near or less than 2 per cent for the rest of the year, a pace that is probably too weak to lower the persistently high unemployment rate.

Source : ft.com