US Services Perk up to an 8-month High — but Hiring’s Still Wobbly

With input from Reuters and Bloomberg.

America’s service economy found a little extra zip in October, even as hiring stayed soft and costs climbed. The ISM non-manufacturing PMI ticked up to 52.4 — the best since February and comfortably above the 50 line that signals growth — thanks largely to a burst of new demand. New orders jumped to 56.2, a one-year high, suggesting customers are still spending even with tariffs muddying the outlook.

Beneath the headline, the picture is messier. The ISM’s employment gauge rose to 48.2, which is “less bad” but still contractionary, marking a fifth straight month of shrinking headcount. Companies in the survey described business conditions as a mixed bag: some steady, some improving, others grumbling about import duties and the ongoing federal shutdown that’s stalling data and decisions.

Prices aren’t helping. The services “prices paid” index climbed to 70.0, a three-year high, a sign that higher import costs are filtering into what service providers shell out for inputs. That keeps the Federal Reserve cautious about cutting rates again soon — especially with official data releases delayed by the shutdown fog.

The demand side looks healthier than the jobs side. Business activity bounced back into expansion at 54.3, and eleven service industries reported growth in October, with retailers among those saying sales were “very strong.” Exports and backlogs, though, remained weak, echoing the drag from trade frictions.

Labor signals outside ISM were only mildly reassuring. ADP’s private payrolls estimate showed a 42,000 job gain in October after a September dip, consistent with a cooling, not collapsing, job market. Employers aren’t hiring aggressively — but they’re not slashing staff either.

Netting it out: services are growing again, orders are up, and inflation pressures are sticky. Hiring is the weak spot. For policymakers and markets, that’s a “drive carefully in the fog” kind of report — momentum without a clean runway.