Survey: Service firms grow at faster pace

WASHINGTON (AP) — U.S. service firms grew at a faster pace in May, driven by a jump in new orders. But a measure of hiring showed companies added fewer jobs.

The Institute for Supply Management said Wednesday that its index of service-sector growth rose to 53.7 from 53.1 in April. Any reading above 50 indicates expansion. Last month’s figure is below the 12-month average of 54.4.

A measure of employment fell to 50.1 from 52, the lowest since last July. Service firms have been the main source of job gains in the past several months. Manufacturers have cut back sharply on hiring this year.
The new orders index rose last month, and a gauge of sales also increased.

The survey measures growth at businesses that employ about 90 percent of the U.S. workforce, ranging from construction companies and health care firms to retail businesses and restaurants.

The survey showed that 13 industries reported growth last month, led by hotels and restaurants, transportation and warehousing, and arts and entertainment. Five said business contracted, including mining, health care and real estate.

Most economists say higher Social Security taxes and steep cuts in government spending are dragging on growth. They forecast the economy will expand at around a 2 percent annual rate in the April-June quarter, down from 2.4 percent in the first three months of the year.

Service companies have accounted for nearly all U.S. job gains in recent months. In April, they added 185,000 jobs, while manufacturers and government agencies cut jobs. Employers overall added 165,000 positions that month.