U.S. services sector activity hits three-year low; labor market solid

WASHINGTON - U.S. services sector activity slowed to a three-year low in September amid rising concerns about tariffs, the latest sign that trade tensions were eroding economic momentum.

A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index would fall to 55.1 in September. The slump in manufacturing and business spending could prompt the Federal Reserve to cut interest rates again later this month. The U.S. central bank cut rates last month after reducing borrowing costs in July for the first time since 2008 to keep the economic expansion on track.

Some of the rise in claims could be the result of an ongoing strike by workers at General Motors. While striking workers are not eligible for unemployment benefits, the work stoppage has affected production, impacting non-striking employees at suppliers. There was a jump in manufacturing claims in Michigan during the week ended Sept. 21.

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