Jul 7, 2021 - Economy

Jobs data at odds with jobs data

ISM services employment index
Data: Institute for Supply Management; Chart: Axios Visuals

The pace of hiring activity in services industries declined in June, according to the Institute for Supply Management.

Why it matters: Labor supply constraints continue to limit the U.S. economy’s ability to grow.

  • This was a reason the ISM services index fell to 60.1 in June from 64 in May, a sign that growth in the services sector is decelerating.
  • The ISM services index is a measure of activity in nonmanufacturing businesses. Services account for 103.5 million jobs, or 71%, of the U.S. payrolls.

By the numbers: The ISM’s services employment index — a subset of the overall index — fell to 49.3 in June from 55.3 in May, which means the amount of hiring went down.

What they’re saying: "Businesses haven’t been able to staff according to the demand levels," Anthony Nieves, chair of the ISM’s Services Business Survey Committee, told Axios.

  • "The labor markets are not there for some of these different services industries."

Yes, but: "That is at odds with the apparent message from the latest payroll figures, which suggested that employment growth is accelerating," Capital Economics’ Michael Pearce observed.

  • Indeed, according to the June U.S. payrolls report, the services sector added 642,000 jobs in June, up from 497,000 added in May.

The bottom line: Expect mixed signals occasionally in short-term data, due to all sorts of data quality issues that have emerged during the pandemic.

  • But even amid this noise, the bigger themes seem to prevail.
  • "The comments accompanying the survey make clear that labor shortages and supply shortages are still squeezing output," Pearce wrote.
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