Delta’s loss is service economy gain, up to a point

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So much for the slowdown in services, perhaps.

The Institute for Supply Management said on Tuesday that its index of activity in the US service sector reached 61.9 in September from 61.7 in August. Anything over 50 represents expansion. September’s figure would have been higher had it not been for slower job growth, a reflection of the difficulty for many companies to find workers rather than any change in demand for labor. -work.

Economists expected the services index to continue the decline that began in August as the economic fallout from the Delta variant worsened. Some other indicators had suggested it, and indeed IHS Markit reported on Tuesday that its separate services index slipped to 54.9 in September from 55.1 in August.

Even that IHS Markit number was considered good news, as an earlier “flash” estimate was lower. The implication is that the survey responses that came in later in the month were more optimistic. In other words, things got better.

Considering what was happening with the pandemic, this might not be entirely surprising: During the first week of September, cases of Covid-19 in the United States were near their summer peak, with an average of 145,840 new cases per day, according to the Centers for Disease Control and Prevention. In the last week of the month, that figure fell to 105,354. Nonetheless, the speed at which growth in the service sector appears to have accelerated is encouraging. It was only clear later in the month that the drop in Covid-19 cases was not just a false head. Additionally, you would think that many activities that usually require a little planning, such as business travel, would have been slow to respond to better news about the pandemic.

If Covid-19 cases can continue to decline this time around, then the service sector should be able to grow steadily and help the economy fully recover. It’s certainly not there yet: Even though gross domestic product surpassed its pre-pandemic level in the second quarter, consumer spending on services was well below that mark.

Yet how the service industry performs in the coming months may depend as much on how we have changed the way we do things as it does on how the fight against the pandemic unfolds. Even if the number of cases drops dramatically, many people could still delay visiting offices every day, for example, which will continue to weigh on the number of downtown service companies. Having learned to meet remotely, many business trips that occurred before the pandemic now seem absurd. There may also be a new seasonality that will persist for many service businesses, such as restaurants, with more activity during the warmer months compared to the colder months than before.

The service industry may come back, but it still won’t be the same.

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The Delta variant of Covid-19 is proliferating around the world, threatening unvaccinated populations and economic recovery. The WSJ breaks down events in key countries to explain why Delta is spreading faster than previously detected strains. Composer: Sharon Shi

Write to Justin Lahart at [email protected]

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