By Burton Frierson
NEW YORK (Reuters) - Growth in the dominant U.S. service sector fell to a four-year low last month while the job market showed only modest improvement, according to reports on Wednesday that reinforced views of a weakening economy.
The Institute for Supply Management said its non-manufacturing index slid to 52.4 in March, down from February's 54.3 and confounding expectations for a rise.
Despite the weak result, which came in below even the lowest of 85 estimates in a Reuters survey, the ISM's inflation gauged jumped.
Meanwhile, U.S. private employers likely added 106,000 jobs in March, according to a report by ADP Employer Services. The March figure was higher than February's 57,000 gain but below markets' expectations.
The signs of service sector weakness held sway in most markets, pushing the dollar lower and lifting government bond prices, which usually benefit during times of an economic slowdown.
Stocks recovered from an initial decline, but concerns over the economy raised by the report on services kept a lid on gains. The data coincided with unexpectedly weak factory orders figures for February, released by the Commerce Department.
"It's looking pretty dark," said Richard Dekaser, chief economist at National City Corp. in Cleveland, commenting after the ISM release.
"On the whole, it speaks to the sluggish pace that the economy is moving at in recent quarters."
The reading on the service sector came two days after the institute reported that manufacturing growth slowed in March while price pressures increased.
The service sector represents about 80 percent of U.S. economic activity -- everything from restaurants and hotels to banks and airlines.
The Commerce Department reported that new orders at U.S. factories rose just 1 percent in February, below expectations for a 1.8 percent rise.
A January drop in factory orders was revised downward to the biggest decline in more than six years. Orders for durable goods, items meant to last three years or more, rose 1.7 percent in February, also revised down from last week.
However, there was some positive economic news. Planned U.S. job layoffs fell 42 percent to an eight-month low in March from February, Challenger, Gray & Christmas, Inc., the global outplacement consultants, said. But the outlook remained bleak in the troubled housing market, the company said.
The government releases its monthly jobs report on Friday. According to the latest Reuters poll of economists, the report is expected to show that 120,000 non-farm payroll jobs were created in March, up from 97,000 in February.
(Additional reporting by Richard Leong, Pedro Nicolaci da Costa and Chris Reese in New York, David Lawder in Washington)