The service sector, which accounts for a huge part of the U.S. economy, looks like it has stalled so investors today and the rest of the week will be focused squarely on the critical jobs market, which could be slowing the recovery.
What are the expectations? The Institute of Supply Management's non-manufacturing composite index, scheduled for release today, is forecast at 50.5 in December, after dipping to 48.7 in November, according to a survey of economists by Bloomberg. A number above 50 indicates the sector is growing and below suggests it is contracting.
Hovering around 50 suggests that the bleak jobs picture, despite the recent improvements, continues to weigh on the economy.
"Unlike its factory cousin, [the non-manufacturing index]has yet to convincingly move above the 50 mark," said Michael Gregory, a senior economist with BMO Nesbitt Burns Inc.
Retail activity continues to be soft, the recovery in the construction sector could be running out of steam and the employment component of the ISM non-manufacturing index has been stuck in the low-40s rut for six months, he said.
Services may mislead "Over all, we think the services are doing better than the [ISM non-manufacturing]survey indicates," said Meny Grauman, a senior economist at CIBC World Markets Inc.
The ISM manufacturing index is a survey of purchasing managers, who probably have a better handle on the underlying economic trends for manufacturers, he said.
However, purchasing managers surveyed in the service sectors are probably not as attuned to the underlying business trends, he said.
"We tend to not emphasize the non-manufacturing survey," Mr. Grauman said.
"We think it's not as precise of a survey at turning points."
Home sales, the financial sector and lots of other service-oriented businesses are ramping up, he said.
In addition to the ISM data, the ADP National Employment report is scheduled for release today. It measures non-farm private-sector hiring and excludes hiring by government agencies. Economists estimate the private sector shed 75,000 jobs during December, compared with the 169,000 jobs lost in November, according to Bloomberg.
Initial weekly jobless claims are due to be released tomorrow and on Friday the U.S. non-farm payrolls data are scheduled for release by the U.S. Bureau of Labour Statistics.