Service sector grows in June at slowest pace in 2.5 years

U.S. service companies grew in June at the slowest pace in nearly 2.5 years, a troubling sign for the economy. But those same firms collectively boosted hiring last month, adding to other data that show job growth may have picked up. The Institute for Supply Management is reporting this morning that its index of non-manufacturing activity fell to 52.1 last month from a May reading of 53.7. The reading was the lowest since January 2010. Still, any reading above 50 indicates expansion. The sector has grown now for 30 straight months. Service companies employ roughly 90% of the economy. They include retail, construction, financial services, health care, and hotels, among others. The industry has weakened at a time when the broader economy has lost vigor. U.S. employers have scaled back on hiring. Paychecks are barely keeping pace with inflation, making consumers less confident in the economy. Consumer spending, which drives 70% of economic activity, didn’t increase from April to May. Still, the report included some hope that the job market is getting better. A measure of employment showed that service firms added more workers last month: The employment index rose to 52.3, up from 50.8 in May.