U.S. services growth slows, but hiring rebounds

CALIFORNIA, UNITED STATES — The ISM Services PMI came in at 54% in June — its 24th consecutive month of expansion — but the broader growth trend slowed as business activity and new orders pulled back, while the employment component returned to expansion for the first time in four months, Staffing Industry Analysts reports.

Services sector holds expansion for second straight year

Steve Miller, CPSM, CSCP, Chair of the ISM Services Business Survey Committee, confirmed the headline figure. “In June, the Services PMI® registered 54 percent, a decrease of 0.5 percentage point compared to May’s figure of 54.5 percent,” Miller said.

The reading marked the sector’s 24th consecutive month in expansion territory, with all four subindexes that make up the composite PMI remaining above their 12-month moving averages.

The Business Activity Index fell 2.3 percentage points to 55.4%, and the New Orders Index declined 2.2 percentage points to 55.1% — both remaining in expansion territory but signaling a slowdown in growth momentum.

Twenty-four consecutive months in expansion is structural health — but the simultaneous pullback in business activity and new orders is the index’s way of flagging that growth is easing.

The employment rebound is the number to watch

“The more than 2-percentage point drops in both the Business Activity and New Orders indexes were partially offset by the 3.3 percentage point increase in the Employment Index,” Miller said of June’s mixed picture.

The Employment Index rose 3.3 percentage points to 51.2% in June, its first reading in expansion territory in four months. The Prices Index fell 3.6 percentage points to 67.7% — its first reading below 70% since February, a sign that inflation pressure in the services sector is beginning to ease.

The Supplier Deliveries Index remained in expansion at 54.4%, its 19th consecutive month above 50, indicating persistent delays in supply chains that continue to slow services delivery.

Services sector employment moving back into expansion after four months of contraction is the standout data point — it suggests services employers are selectively adding headcount even as growth moderates.

The ISM Services PMI covers the sector where BPO and offshore delivery are most concentrated — professional services, IT, and finance — making its employment rebound directly relevant to offshore hiring pipelines.

Four months of services employment contraction followed by a rebound tracks the pattern of BPO buyers pausing hiring decisions mid-cycle before restarting with offshore-first structures.

With prices easing and employment expanding, services-sector clients are stabilizing — and that is typically when offshore vendors close the pipeline deals that stalled during the contraction.