WRAPUP 3-US service sector grows more slowly, employment weak

* U.S. ISM service sector index slips to 53.8 from 55.4

* Employment component of ISM index falls to 49.7

* Conference Board employment index improves
(Update markets to close)

By Ed Krudy

NEW YORK, July 6 (BestGrowthStock) – The U.S. service sector
expanded in June for a sixth straight month but growth was at
the slowest pace since February, the latest evidence that the
economic recovery is cooling.

Analysts said the data released on Tuesday by the Institute
for Supply Management, an industry group, did not signal that
the United States is slipping back into recession — something
which has been a persistent fear in the wake of a raft of
disappointing data.

The data on business activity in the service sector, which
dominates the U.S. economy, follows weak reports in recent
weeks on U.S. consumer spending, factory activity, employment
and the housing market.

The Institute for Supply Management said its service sector
index fell to 53.8 from 55.4 in May. A reading above 50
indicates expansion in the sector, while a reading below 50
indicates contraction. The median forecast was for a reading of
55, according to a survey of 72 economists polled by Reuters.

“It’s consistent with the general tone of data, suggesting
that the pace of growth is a little more moderate,” said
Charles Lieberman, chief investment officer at Advisors Capital
Management LLC in Hasbrouck Heights, New Jersey.

“It’s certainly not suggestive of the double-dip scenario
that some people are pushing,” he added.

New orders also fell, to 54.4 from 57.1, suggesting growth
may be moderating, while export orders turned negative.

U.S. stocks (Read more about the stock market today. ) rebounded on Tuesday with all three major
indexes closing moderately higher, but gains came as investors
took advantage of recent price declines. Prices of safe-haven
Treasuries rose as bond investors continued to bet the Federal
Reserve will keep interest rates low into the second half of
2011 to avoid a double-dip recession.


The ISM report’s data on employment gave a more pessimistic
picture of the economy. The employment component declined to a
reading of 49.7 from 50.4, contracting once again after having
turned positive last month and confirming weak reports on the
labor market.

On Friday, the U.S. Labor Department reported private
payrolls rose only modestly in June and overall employment fell
for the first time this year as thousands of temporary
government census jobs ended.

“Right now the labor market — and rightfully so — is
everybody’s focus,” said Peter Jankovskis, co-chief investment
officer at Oakbrook Investments LLC in Lisle, Illinois.

The health of the labor market is considered key to the
U.S. economic recovery because jobs are critical to powering
consumer spending, which drives about two-thirds of the
country’s economy.

For a graphic click on:

U.S. services sector:
The services sector expanded at a slower-than-expected pace in

Separate data on Tuesday gave a somewhat more positive
reading on the labor market. The Conference Board, a private
research group, reported its gauge of the U.S. job market
improved in June for the 11th straight month, but at a moderate
pace amid weak private-sector job creation.

The Conference Board said its Employment Trends Index rose
to 96.7, up from a revised 96.1 in May.

The index is up about 9.8 percent from a year ago, the
group said.

“The weak growth in private sector employment in the last
two months has been disappointing, given the robust recovery in
production in recent quarters,” said Gad Levanon, associate
director for macroeconomic research at The Conference Board.

“The moderate increase in the Employment Trends Index in
the last two months suggests that many employers are now
concerned that the recovery is losing momentum.”
(Reporting by Edward Krudy; Writing by Leslie Adler; Editing
by Dan Grebler)

WRAPUP 3-US service sector grows more slowly, employment weak