Labor Market
Hiring conditions at U.S. services companies improved modestly in October, according to the Institute for Supply Management. ISM’s Services Employment Index registered 51.4% in the October Services PMI Report, released Wednesday, Nov. 4, up 1.3 percentage points from 50.1% in September. It was the second straight month above 50, the line that separates growth from contraction, and 2.1 points above the index’s 12-month average of 49.3%.
The gain was narrow, though. Only six of the industries ISM tracks reported higher employment in October, while seven reported lower employment.
What the index measures
The employment index is a diffusion index built from a monthly survey of purchasing and supply executives, not a count of jobs. Respondents say whether employment at their organizations was higher, the same or lower than the month before, and the result is seasonally adjusted.
In October, 16.6% of respondents reported higher employment, 69.9% reported no change and 13.5% reported lower employment. In September, 16.5% had reported higher employment and 16.2% lower. The improvement came mainly from fewer companies cutting, rather than more companies adding. The index was below 50 in August, at 47.8%, and in July, at 47.4%.
Which industries added and cut
The six industries reporting increased employment, in ISM’s order, were transportation and warehousing; retail trade; real estate, rental and leasing; accommodation and food services; utilities; and wholesale trade.
The seven reporting decreases were management of companies and support services; health care and social assistance; other services; mining; construction; educational services; and public administration.
ISM quoted two respondents on employment. One cited “Increasing employment to support business growth and new contract awards.” Another wrote, “Less people, more work equals frustration.”
The industry pattern differs in places from the government’s payroll count. The Bureau of Labor Statistics reported Friday, Nov. 6, that health care added 42,000 jobs in October, even as health care and social assistance appeared on ISM’s list of industries with lower employment. The two measures are built differently: ISM reports the direction of change among surveyed companies, while BLS estimates the number of jobs from a large employer survey, so they can diverge in any given month.
The broader services picture
The overall Services PMI registered 54.5%, down 0.4 point from 54.9% in September, marking the 28th consecutive month of expansion for the sector. The Business Activity Index fell 2.7 points to 53.8%, and the New Orders Index fell 3.9 points to 55.9%. Fifteen services industries reported overall growth and two, construction and health care and social assistance, reported contraction.
Steve Miller, chair of ISM’s Services Business Survey Committee, said that for the first time since February 2026 all 10 of the survey’s indexes were in expansion territory. The Backlog of Orders Index rose to 58%, its highest reading since July 2022, and the Supplier Deliveries Index rose to 56.7%, indicating slower deliveries.
Miller linked those strains to staffing. “The Employment Index’s second consecutive reading above 50 percent may indicate help is on the way for slowing supplier deliveries and increasing order backlogs,” he said in the report.
Cost pressure remained heavy. The Prices Index registered 73%, down from 74% in September, and has exceeded 60% for 23 straight months. Miller said tariffs and fuel costs were the most-cited issues affecting respondents’ supply chains.
How it compares with manufacturing
ISM’s separate Manufacturing PMI Report, released Monday, Nov. 2, put the factory employment index at 52.4%, down from 52.7% in September. That means both of ISM’s major surveys showed employment growth in October, with services improving while manufacturing eased slightly.
For job seekers, the services survey points to more hiring activity in logistics, retail, hospitality, real estate and utilities than in support services, education, construction or public administration. Because the index measures how many companies reported changes rather than how many workers were hired, it is best read alongside the monthly payroll data.
Sources
- Institute for Supply Management, “October 2026 ISM Services PMI Report,” November 4, 2026. https://www.ismworld.org/supply-management-news-and-reports/reports/ism-pmi-reports/services/october/
- Institute for Supply Management via PR Newswire, “Services PMI at 54.5%; October 2026 ISM Services PMI Report,” November 4, 2026. https://www.prnewswire.com/news-releases/services-pmi-at-54-5-october-2026-ism-services-pmi-report-302928112.html
Featured photo: The St. Marks Terminal of Groendyke Transport on Port Leon Drive in St. Marks, Florida, Sept. 4, 2025. Representative image; not a company named in the ISM report. Photo: The Bushranger, via Wikimedia Commons (CC BY-SA 4.0). Cropped from the original.
