Slowing Demand in the Service Sector Spells Trouble for the Economy - The Average Joe


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    Slowing Demand in the Service Sector Spells Trouble for the Economy

    Rhea Lobo

    July 10, 2024

    It’s all business as usual until the service sector decides to take a break(down). In June, the Institute for Supply Management (ISM) index, a key measure of the service sector’s economic health, fell to 48.8 from 53.8 in May. Historically, any figure below 50 signals contraction, indicating a potential slowdown.

    • Service-providing businesses make up 86% of US jobs, so a continued slowdown in demand could lead to reduced hiring and possible job cuts in the sector.
    • Hiring has already slowed, with an average of 168K jobs added monthly from April to June — down from 241K jobs in the first three months of 2024.

    Fiscal heartburn: All sectors are feeling the pinch — spending at restaurants and bars has dropped, while retail and temporary help sectors are seeing job losses. This downturn is part of a broader moderation in overall consumer spending, which drives 70% of the US economy and has been affected by high inflation, elevated interest rates, depleted pandemic savings, and rising debt. ING’s James Knightley noted, “Consumers are key to where the US economy goes… we’re starting to see stress in more and more households” (CNN).

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