Service sector expands at fastest pace on record

The service sector expanded in August at its fastest pace on record, another encouraging sign for the strengthening economy.

The Institute for Supply Management's services index rose to 59.6 last month, the fastest pace since the gauge's inception in January 2008. That is up from 58.7 in July, the index showed Thursday. 

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Any readings above 50 signal expansion.

The index is a survey of a wide variety of businesses — the sector employs 90 percent of all workers, including those at restaurants, hotels and retailers.

All told, 15 of 17 industries reported growth last month with arts, entertainment and recreation, along with mining reporting contractions.

Businesses increased hiring for the sixth straight month with the index climbing to 57.1 last month from 56.

The business activity/production index expanded at a faster pace to 65 after making big strides in the previous two months — to 62.4 in July from 57.5 in June.

Inventories held steady while prices and new orders each increased at a slower pace.

The economy rebounded in the April-June quarter, hitting a 4.2 percent annual pace after a dismal contraction during the first three months of the year. 

The Labor Department is set to release its August jobs report on Friday. Experts predict it will show the addition of 220,000 positions, which would be the seventh straight month that gains have eclipsed the 200,000 mark.

Good economic news continued to pour in this week. 

A separate ADP report showed Thursday that the private sector added a solid 204,000 jobs last month, a sign of consistent growth. 

Earlier this week, the ISM's manufacturing gauge showed that the sector grew at its fastest pace since 2011.