By Shobhana Chandra Dec. 3 (Bloomberg) -- U.S. service industries probably contracted in November at the fastest pace on record, sinking the economy deeper into what may become the worst recession in decades, economists said before a report today. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, fell to 42, the lowest level since records began in 1997, according to the median forecast in a Bloomberg News survey. Readings below 50 indicate a contraction. Americans, hurt by mounting job losses, a lack of credit and falling home and stock values, are losing confidence and cutting spending on everything from cars and furniture to food and vacations. Slumping sales are prompting even more job cuts, signaling the economic slump will persist well into 2009. “Services are pretty much going down hand-in-hand with manufacturing,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “A rebound in the economy before early 2010 is unlikely.” The Tempe, Arizona-based group’s report is due at 10 a.m. New York time. Estimates in the Bloomberg survey of 64 economists ranged from 37 to 46.5. The gauge was at 44.4 in October. ISM said earlier this week that its factory index dropped in November to the lowest level since 1982. A private report today is projected to show the labor market deteriorated further last month. ADP Employer Services may report companies cut an estimated 205,000 jobs in November, the most since the 2001 recession, according to the survey median. The figures are due at 8:15 a.m. Job Losses The Labor Department’s November jobs report, due Dec. 5, may show the biggest one-month payroll drop since the 2001 terrorist attacks, according to the Bloomberg survey. A slowdown in worker efficiency indicates firings may accelerate in coming months as companies try to lower labor costs and protect profits. Productivity, a measure of employee output per hour, probably rose at a 0.9 percent annual rate in the third quarter, a Labor Department report at 8:30 a.m. is projected to show. The revised figure is lower than estimated last month and a quarter of the 3.6 percent gain in the prior three months. The U.S. entered a recession a year ago this month, the National Bureau of Economic Research, which dates American business cycles, said this week. At 12 months, the contraction is already the longest since the 16-month slump that ended in November 1982, and exceeds the postwar average of 10 months. Worsening Outlook Also today, the Federal Reserve’s beige book survey, a compendium of regional economic activity, is due at 2 p.m. The report is likely to underscore the worsening economic outlook. “Neither consumers nor businesses have much confidence in the prospects for the near term,” Fed Bank of Philadelphia President Charles Plosser said yesterday at a seminar at the University of Rochester. Consumer spending, which accounts for about 70 percent of the economy, faltered last quarter and is likely to keep sliding. Purchases from July through September posted the biggest drop since 1980, causing the economy to shrink. The housing downturn, likely to extend into a fourth year, will remain a drag. Retailers are concerned the holiday shopping season may be the worst in at least six years. Sears Holdings Corp., the largest U.S. department-store company, yesterday abandoned its earnings forecast for the remainder of the year, citing “severe conditions in the economy.” Financial services remain in distress. Citigroup Inc., which is planning to eliminate 52,000 jobs, this week said it dropped a portion of the severance payment offered to employees who have been at the bank for a decade or longer. Bloomberg Survey ================================================================ ADP Prod- Labor ISM Non- Payroll uctivity Costs Manu ,000’s QOQ% QOQ% Index ================================================================ Date of Release 12/03 12/03 12/03 12/03 Observation Period Nov. 3Q 3Q F Nov. ---------------------------------------------------------------- Median -205 0.9% 3.6% 42.0 Average -219 0.9% 3.4% 42.1 High Forecast -169 1.5% 4.1% 46.5 Low Forecast -350 0.6% 2.0% 37.0 Number of Participants 22 57 51 64 Previous -157 1.1% 3.6% 44.4 ---------------------------------------------------------------- 4CAST Ltd. -225 0.9% 3.3% 43.1 Action Economics -280 0.9% 3.1% 43.0 AIG Investments --- 0.9% --- 44.0 Aletti Gestielle SGR --- 0.9% --- 44.0 Ameriprise Financial Inc -180 1.0% 3.6% 43.5 Argus Research Corp. --- 1.2% 3.2% 46.5 Banc of America Securitie --- 0.9% 3.8% 42.0 Bank of Tokyo- Mitsubishi --- 0.9% 3.8% 43.3 Bantleon Bank AG --- 0.9% 3.4% 41.8 Barclays Capital --- 0.8% 3.0% 42.0 BMO Capital Markets -260 0.9% 3.8% 41.0 BNP Paribas --- 1.0% 3.6% 40.5 Briefing.com --- 1.0% --- 43.5 Citi --- 0.9% --- --- ClearView Economics --- 0.9% 3.8% 42.0 Commerzbank AG --- 0.8% 3.9% 43.0 Credit Suisse --- 0.9% 3.0% 42.0 Danske Bank --- --- --- 42.8 DekaBank --- 0.9% 3.4% 42.0 Desjardins Group --- 0.8% 3.9% 42.5 Deutsche Bank Securities --- 0.8% 3.9% 39.0 Deutsche Postbank AG --- --- --- 42.0 Dresdner Kleinwort --- 0.9% 3.7% 40.0 DZ Bank -210 1.0% 3.7% 41.5 First Trust Advisors --- 0.9% 2.7% 41.7 Fortis --- 0.9% 2.0% 44.0 Goldman, Sachs & Co. -275 0.9% --- 43.0 Helaba --- 0.9% 3.7% 44.0 Herrmann Forecasting -169 0.8% 3.2% 41.1 High Frequency Economics -250 --- --- 40.0 Horizon Investments --- 1.0% 3.7% 40.0 HSBC Markets -230 0.9% 3.8% 41.0 IDEAglobal -195 1.0% 3.7% 42.0 IHS Global Insight --- 1.3% 2.9% 42.7 Informa Global Markets -240 0.6% 4.1% 43.0 ING Financial Markets -200 0.8% 3.9% 41.0 Insight Economics --- 0.9% 3.8% 42.0 Intesa-SanPaulo --- 0.9% 3.4% 42.0 J.P. Morgan Chase --- 1.2% 2.9% 42.0 Janney Montgomery Scott L -225 1.0% 3.6% 41.0 Landesbank Berlin --- --- --- 42.0 Landesbank BW --- 0.9% 3.7% 42.0 Moody’s Economy.com --- 1.3% 2.6% 42.0 Morgan Stanley & Co. --- 0.8% 3.2% --- National Bank Financial --- --- --- 42.0 Natixis -350 --- --- 42.5 Newedge --- 0.9% 3.6% 41.5 Nomura Securities Intl. -180 1.1% 3.0% 45.0 PNC Bank --- 1.0% 3.8% 42.0 RBS Greenwich Capital --- 0.9% 3.0% 40.0 Ried, Thunberg & Co. -175 0.8% 3.2% 44.5 Schneider Trading Associa -195 0.7% 3.9% 41.6 Scotia Capital -200 --- 3.6% 40.0 Societe Generale --- --- --- 44.0 Standard Chartered --- 0.8% 3.5% 40.0 Stone & McCarthy Research --- 1.1% 3.6% 42.6 TD Securities -250 1.0% 3.7% 40.0 Thomson Financial/IFR --- 1.0% 3.4% 37.0 Tullett Prebon --- 0.9% --- 42.0 UBS Securities LLC --- --- --- 42.0 Unicredit MIB --- 0.8% 2.6% 41.0 University of Maryland -175 0.9% 3.8% 42.0 Wachovia Corp. --- 0.9% 3.6% 45.0 WestLB AG -180 1.5% 3.1% 42.5 Westpac Banking Co. --- 0.9% --- 42.0 Wrightson Associates -175 0.8% 3.2% 44.5 ================================================================ To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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