Services growth slows, but silver lining jobs

Workers are visible in an Office in Jersey City, New Jersey on December 9, 2009.

Credit: Reuters/Lucas JacksonBy Leah Schnurr

NEW YORK | Wed July 6, 2011 12: 00 pm EDT

NEW YORK (Reuters) - growth in services broad sector of the economy of the United States remained sluggish in June as new orders fell, but economists said that a reading of a stable job told the employment growth later in the year.

Image of the Wednesday of the conditions of the labour market at the Institute for supply management services sector data comes from two days in advance of the U.S. key jobs report which is supposed to show non-farm payroll rose modestly last month after the collapse in May.

Analysts are watching closely the signs that the economy is gaining traction after growth has slowed in the first six months of 2011, and many are accelerating at the end of the year.

John Silvia, Wells Fargo Chief Economist, said that, if data services was lower than expected, it was always compatible with sustained economic growth in the second half of the year.

Silvia "positive is that the employment index remains in the territory of expansion", wrote in a note. "This reading suggests growth prospects of ongoing payroll in the coming months."

The index of the ISM Report services fell to 53.3 month last of 54.6 in May. The reading was shy of forecasts of economists to 54.0, according to Reuters. A reading above 50 indicates expansion in the sector.

The dip comes after a modest gain in may, and the index is still off the coast of the Advanced view earlier this year.

The new component command while relaxed to 53.6 56.8, as the gauge of employment improved slightly, edging up to 54.0 54.1.

Employment growth is essential to strengthen the confidence of consumers, and even if the tonnage of the job held until this month, it must be higher, said Anthony Nieves, President of the Commission of inquiry ISM non-manufacturing business.

"People are always work." Companies add some posts, but on the whole, people are still trying to find their way, "Nieves told a conference call."

Despite the lack of light on the front of the employment, Chris Low, an economist at FTN financial, said the index has not yet signal of the economy has overcome recent weakness.

"The small decline in June a reminder that while the economy may stabilize at a slower pace of growth, there is little evidence of reacceleration," said low.

Treasury prices rose after the data, and there were few moving in US stocks as investors focused on the concerns renewed during the crisis of sovereign debt of the euro area and China's interest rate increase.

The ISM report echoed data from Europe Tuesday that growth services has slowed the month last faced with the stagnation of new orders and rising interest rates.

Key to Friday report of non-farm payroll U.S. forecast to show the economy 90,000 jobs in June, compared to just 54 000 the previous month. For an overview, see

A report on the employment of private sector U.S. Thursday should also show a gain of 68 000 jobs.

A separate report on Wednesday gave a more cloudy labour market image as the number of layoffs planned at American companies have increased for the second month in a row in June, if the reduction in the first half of the year were at the lowest level since 2000.

Data the latest on the housing market was mixed as buy applications for home mortgages of the pink U.S. last week, but refinancing activity plunged as interest rates jumped, according to the Mortgage Bankers Association.

(Other reports by Ellen Freilich;) (Editing by Padraic Cassidy)