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Economic report Score 75 Neutral

U.S. Services Sector Growth Slows in March Amid Employment Downturn

Apr 06, 2026 14:41 UTC
^VIX, SPY, TLT
Short term

The Institute for Supply Management reported a deceleration in U.S. service sector activity in March, with the services PMI dropping to 54.0 from 56.1 in February. The unexpected slowdown raises questions about economic momentum and potential policy implications.

  • U.S. services PMI fell to 54.0 in March, below expectations of 54.7.
  • Employment index dropped to 45.2, indicating a contraction in hiring.
  • Business activity index declined to 53.9 from 59.9 in February.
  • New orders index hit 60.6, the highest since February 2023.
  • Prices index surged to 70.7, the highest since October 2022.
  • Manufacturing PMI rose to 52.7 in March, slightly above expectations.

The U.S. services sector experienced a notable slowdown in growth during March, according to the Institute for Supply Management (ISM). The services PMI fell to 54.0 in March, down from 56.1 in February, marking a sharper decline than the 54.7 economists had anticipated. While the index remains above the 50 threshold that signifies expansion, the drop highlights a weakening in economic activity. The employment component of the report was particularly concerning, with the employment index plummeting to 45.2 from 51.8 in February, signaling a contraction in hiring. Business activity also decelerated, as the business activity index dropped to 53.9 from 59.9 in the prior month. However, the new orders index rose to 60.6 in March, the highest level since February 2023, suggesting continued demand in some areas. Prices also saw a significant increase, with the prices index reaching 70.7, the highest since October 2022, as companies reported higher costs for gas, diesel, and other goods. Steve Miller, Chair of the ISM Services Business Survey Committee, attributed the challenges to the ongoing conflict with Iran and its impact on oil prices. Meanwhile, the ISM’s manufacturing PMI showed a modest increase to 52.7 in March, slightly defying expectations of a decline to 52.3. The mixed signals from the services and manufacturing sectors may influence investor sentiment and policy discussions, particularly as markets assess the broader economic outlook.

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