U.S. service sector adds jobs but growth slows

The Institute for Supply Management said this week The Institute for Supply Management said this week that its index of service-sector growth fell in June to 52.2. Above, a worker reaches for glass to assemble a double-pane window frame at Crystal Windows & Doors IL Manufacturer in Chicago last year. (Aug. 3, 2012) Photo Credit: Bloomberg News

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U.S. services firms grew at a slower pace in June from May but added more jobs. The figures offered a mixed sign for companies that employ roughly 90 percent of the workforce.

The Institute for Supply Management said this week that its index of service-sector growth fell in June to 52.2. That's down from 53.7 in May and the lowest reading in more than three years. Any reading above 50 indicates expansion.

The index was dragged down by steep drops in new orders and a measure of the business outlook.

Still, a gauge of employment jumped to 54.7, up from 50.1 in May. That's the first increase in five months and suggests services firms hired more briskly last month.

The survey measures growth at businesses that cover most of the job market. They range from construction companies and health care firms to retail businesses and restaurants.

Growth in the service industry depends largely on consumers, whose spending drives roughly 70 percent of economic activity. The housing rebound and a pickup in consumer spending helped increase the index earlier this year.

Spending at retail businesses rose in May, a sign that solid job growth has encouraged Americans to spend more. And the improving job market has lifted consumer confidence to a 5½-year high.

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