U.S. services industries’ employment is still declining amid a weakening job market

The U.S. services industries reported another dip in employment for the month of July just days after a concerning jobs report showed the market still in decline. 

Employment in the services industries sector was still in contraction for July at 46.4%, dropping further below the Institute for Supply Management’s Employment Index benchmark of 50%. Anything below 50% indicates a decline. 

July’s employment report shows a 0.8% drop from June’s employment report of 47.2% — which still showed a decline, according to new survey data published Tuesday by ISM. 

Over the last five months, employment in the services sector has been under the 50% benchmark four times. May’s report was slightly about the threshold at 50.7%.

The July jobs report released Friday showed a weaker job market than previously expected. The last three months since July marked the weakest stretch since early in the COVID-19 pandemic. Unemployment increased to 4.2% — its highest level since October 2021. 

Some survey respondents in ISM’s report said in July it was “difficult to recruit in this market” and cited “having issues backfilling [open] positions with qualified candidates” as reasons for the dip in employment. 

The accommodation and food services industry saw the biggest decline in employment last month, followed by mining, management of companies and support services, educational services, construction, public administration, agriculture, forestry, fishing and hunting, professional, scientific, and technical services, and health care and social assistance. 

Real estate, transportation, and retail trade, among others, saw upticks in employment in July. 

The services industries PMI for July came in at 50.1%, a 0.7% dip from June. Although July’s PMI is above the benchmark for growth, ISM Chair Steve Miller said in the release that it “continues to reflect slow growth.” 

Prices paid by services industries for materials and services jumped again for the 98th consecutive month, which comes out to about eight years. The prices index of 69.9% is the highest it's been since October 2022, and its eighth consecutive month above 60%. 

“The New Exports (a 3.2-percentage point decrease in July) and Imports (a 5.8-point drop) indexes, which both moved from expansion to contraction, provided signals that tariff tensions are impacting global trade,” Miller added. “However, continued expansion in the Business Activity and New Orders indexes, together with a slight improvement in the Backlog of Orders Index, highlight the resilience of the U.S. services sector.”