Service-sector growth hits 11-month high

Service-sector growth accelerated at the fastest pace in 11 months in January as businesses picked up hiring at a rapid rate. 

The Institute for Supply Management said Friday that its index of non-manufacturing activity bumped up to 56.8 percent in January, more than expected and the best showing since February 2006, from an upwardly revised 53 percent in December. 

The index had hit its lowest level of 2011 in November, when it was at 52 percent. 

Any reading higher than 50 percent indicates expansion.

A seperate report from the Labor Department on Friday showed that employment in leisure and hospitality increased by 44,000, primarily in food services such as restaurants and bars, which added 33,000 jobs. Since a recent low in February 2010, the food-services sector has added 487,000 jobs.

The federal government reported an addition of 243,000 jobs in January, a much higher number than expected, which provided a boost to U.S. stock markets Friday. 

The service sector, which has been on a growth spurt for 25 straight months, employs about 90 percent of all workers, including those employed by restaurants, hotels and retailers.

Job growth combined with consumer spending are the biggest factors in fueling the service sector’s continued expansion. If consumers are willing to spend more in the new year, employers might pick up hiring, as spending accounts for 70 percent of economic activity. 

Most of the index’s components reflected positive growth after months of stagnation: Business activity increased to 59.5 percent, up from the seasonally adjusted 55.9 percent reported in December, reflecting growth for the 30th consecutive month. New orders were up to 59.4 percent from 54.6 percent in December.