U.S. Services Sector A Bright Spot In Latest Economic Report

According to a new report from the Institute for Supply Management (ISM), the U.S. services sector activity expanded at a brisk pace in May. The sector accounts for the majority of U.S. economic activity. The report shows that the index for the sector rose 1.4 points to a reading of 56.9 in May. A reading above 50 indicates expansion in the sector.

The services sector also ramped up its hiring of workers. A gauge of services industry employment rose 4.4 points to reach a seven-month high. An ADP National Employment Report showed the services sector added 71,000 jobs last month, mainly concentrated in professional and education and health services. In contrast, construction payrolls decreased by 36,000, the most since 2010, and manufacturing shed 3,000 positions. The unemployment rate for May is seen as unchanged at 3.6 percent.

According to the ISM report, 16 industries reported growth last month, including utilities, real estate, finance and insurance, healthcare and social assistance, information, and professional, scientific and technical services. The only industry reporting a decline was agriculture, forestry, fishing and hunting.

The new data comes after a raft of weak reports suggesting a loss of momentum in economic growth in the second quarter. The economy grew at a 3.1 percent annualized rate in the first quarter, but the Atlanta Fed is forecasting growth at a 1.3 percent annualized rate in the second quarter. Private employers added only 27,000 positions in May, after creating 271,000 jobs in April.

The economy is also being affected by the numerous trade disputes the U.S. is currently engaged in. President Donald Trump slapped additional tariffs of up to 25 percent on $200 billion of Chinese goods in early May. Beijing has since retaliated by slapping tariffs on goods from the U.S. The president is also considering levying tariffs on Mexico for its failure to curb the tide of illegal immigration across the U.S.-Mexican border.