Jobs Optimism Grows Despite Services Slowdown

NEW YORK (TheStreet) -- Employment in the U.S. service sector strengthened in June even as the overall economy appears to have slowed, the Institute for Supply Management, a not-for-profit industry association, said on Wednesday.

The ISM's headline non-manufacturing index fell 1.5 percentage points to 52.2% in June, missing expectations and indicating ongoing growth but at a slightly slower rate. Economists, on average, were expecting a read of 54%, according to a Thomson Reuters survey.

The lackluster data was led by a decline in the new orders index by 5.2 percentage points to 50.8%, the lowest point since July 2009, and a fall in the business activity index to 51.7% from 56.5%.

On a positive note, the employment index increased 4.6 percentage points to 54.7%, indicating growth in employment in the services sector for the 11th consecutive month. This served to reinforce the data from the ADP National Employment Report earlier in the day showing that private sector employment in the U.S. increased by a greater than expected 188,000 jobs in June from May. Economists on average were expecting June gains of 160,000.

Amna Asaf, an economist at Capital Economics wrote in a client note that the employment component of the ISM non-manufacturing report points to an improvement in private services payroll growth to over 200,000 in June from 179,000 in May. Asaf added that taken together with Wednesday's ADP report, she's expecting upside from her original forecast that nonfarm payrolls rose by around 150,000 in June.

Written by Andrea Tse in New York

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