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US Services Sector Recovers, Employment Slows Again
The Institute for Supply Management (ISM) announced on Thursday, July 3, that its Purchasing Managers' Index (PMI) for the US services sector rose to 50.8 in June, up from 49.9 the previous month.
The PMI reading for the services sector was higher than economists' expectations in a Reuters poll of 50.5.
The PMI reading indicates that the services sector, which accounts for more than two-thirds of the US economy, recovered last month. A PMI reading above 50 indicates growth, while a reading below 50 indicates contraction.
Experts said that US businesses are facing uncertainty about what will happen after President Donald Trump's 90-day suspension of tariffs on several trading partners expires next week, according to Reuters.
According to data from the Institute for Supply Management, the new orders index rose to 51.3 points in June, compared to 46.4 points in May, but the increase in demand did not lead to an improvement in employment.
The services sector employment index fell to 47.2 points last month, compared to 50.7 points in May, marking the third decline in the past six months.
These data are consistent with other indicators that point to a weakening labor market in the US private sector, as companies are reluctant to add staff.
The Institute for Supply Management noted what it described as "tighter monitoring of all job openings, whether new or replacement jobs."
At the same time, companies continue to retain employees after facing challenges finding workers during and after the COVID-19 pandemic. This keeps the labor market active and prevents the US economy from entering a recession.
Economists expect the impact of US tariffs on inflation to become apparent during the summer, noting that inflation has remained largely moderate as companies sell off a backlog of goods prior to the tariffs.
