US services sector slows in June

The US services sector slowed in June but there were was a pickup in hiring, according to an ISM report released Wednesday.

The Institute for Supply Management said business activity in the massive services sector fell to 52.2 on its purchasing managers index from 53.7 in May.

The June reading was the lowest since November 2009, when the index registered 50.9 percent.

The sharp decline surprised analysts who had penciled in a consensus estimate of 54.0 for the sector, which accounts for about 80 percent of the private sector economy.

A reading above 50 indicates growth and one below 50 shows contraction.

"The ISM report was a disappointing read on the US economy (excluding manufacturing) in a month that saw Fed tapering fears ramp up, along with liquidity problems in China hitting the front pages," said Jennifer Lee of BMO Capital Markets.

It "looks like businesses were more rattled in June about the economy than consumers were," she said.

The ISM said 11 service industries reported increased business activity, while seven said it had fallen.

"The majority indicate that growth has been slow and incremental; however, it is still better year over year," Anthony Nieves, chair of the survey committee, said in a statement.

New orders fell the most in June, down 5.2 percentage points from May, followed by business activity and production, down 4.8 points.

But employment jumped 4.6 points, to 54.7, in the 11th consecutive month of growth.

The encouraging reading on employment came ahead of Friday's government report on June unemployment and jobs creation.

Earlier in the day a pair of positive indicators on employment -- the ADP payrolls firm's private-sector hiring and the Labor Department's weekly jobless claims report -- pointed to steady jobs growth.

The Labor Department is expected to report on Friday that job growth edged up to 180,000 in June from 178,000 in May and the unemployment rate held steady at 7.6 percent.