The U.S. economy showed resilience in November, with steady business activity driven by the services sector, according to a new S&P Global survey. However, the report also revealed a decline in private-sector employment—the first drop in nearly three and a half years—raising concerns about the labor market and economic momentum heading into 2025.
The data presents a mixed economic picture, highlighting strength in consumer-driven industries while manufacturing struggles due to rising costs and weakening demand. Private-sector job losses could signal a broader slowdown, potentially dampening consumer spending and overall growth in the coming months.
Services Sector Keeps Economy Afloat
The services sector, which accounts for more than two-thirds of U.S. economic activity, remained the key driver of growth in November, despite ongoing inflation and high interest rates. Industries such as travel, entertainment, healthcare, and financial services continued to expand, preventing the economy from slipping into contraction.
“While services growth has slowed compared to earlier in the year, it remains the key driver preventing the U.S. economy from slipping into contraction,” said Chris Williamson, Chief Business Economist at S&P Global.
Key Trends in the Services Sector:
- Consumer spending remained stable, particularly in leisure, hospitality, and professional services.
- Businesses passed rising costs onto consumers, maintaining profit margins despite inflationary pressures.
- New orders grew modestly, signaling continued demand for services.
- Hiring remained sluggish, as companies tightened budgets amid economic uncertainty.
While the services sector remains resilient, the slowdown in hiring and cautious business expansion reflect growing concerns about the broader economy.
Manufacturing Sector Continues to Struggle
Despite strength in services, U.S. manufacturing remains in contraction, pressured by weak domestic demand, high borrowing costs, and sluggish global trade. Many manufacturers are cutting production, citing slower order flows, excess inventory, and rising costs.
“The manufacturing sector is grappling with a combination of weak demand, rising costs, and global trade uncertainty,” Williamson noted. “These factors are weighing on overall economic sentiment, even as the services sector shows resilience.”
Challenges Facing U.S. Manufacturing:
- New orders declined, reflecting weaker consumer and business demand.
- Exports remained under pressure, impacted by global economic uncertainty and a strong U.S. dollar.
- Higher interest rates have limited investment, slowing down production expansion and equipment upgrades.
With Federal Reserve interest rates still elevated, manufacturers face challenges in securing affordable financing, making it harder to invest in technology, production capacity, and workforce expansion.
Private-Sector Job Losses Raise Red Flags
The most concerning development from the S&P Global report is the decline in private-sector jobs, marking the first monthly drop since early 2021. Hiring slowdowns in both services and manufacturing indicate that businesses are becoming more cautious as they navigate economic uncertainty.
Although the unemployment rate remains historically low, a prolonged hiring slowdown could erode consumer confidence and spending, posing risks to overall economic stability in 2025.
Economic Outlook: What’s Next?
Despite strength in the services sector, the U.S. economy faces significant headwinds, including:
- Slowing job growth, which could reduce consumer spending and weaken demand.
- High interest rates, making borrowing more expensive for businesses and households.
- Global trade uncertainty, which continues to weigh on manufacturing and exports.
As policymakers, businesses, and investors monitor economic signals, the next few months will be critical in determining whether the U.S. economy can sustain growth or begins to slow further into 2025.
