US service industries expand at slower pace than expected

[NEW YORK] US service providers expanded in June by less than forecast as a measure of employment contracted, reflecting employers' struggle to attract workers.

The Institute for Supply Management's services index fell to 60.1 last month from a record 64 in May. Readings above 50 indicate expansion. Orders and business activity also settled back. The June figure compared with the 63.5 median projection in a Bloomberg survey of economists.

While cooling from a month earlier, the report shows still-solid demand for services like restaurant dining, hotel stays and travel. The ISM's measure of order backlogs was the highest in the group's data back to 1997.

At the same time, an index of services employment dropped to the lowest level this year, slumping to 49.3 from 55.3 a month earlier. The June figure mirrored a similar result from the ISM's survey of manufacturers, which also showed employment contracted.

"The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month's all-time high," Anthony Nieves, chair of the ISM's Services Business Survey Committee, said in a statement. "Challenges with materials shortages, inflation, logistics and employment resources continue to be an impediment to business conditions."

Sixteen of 18 service industries reported growth in June, led by arts, entertainment and recreation. Real estate and agriculture reported decreases.

BLOOMBERG