WASHINGTON – Activity in the services sector, where most Americans work, hit a 17-month high in July but economists fear that may be unsustainable because of the failure in the U.S. to contain COVID-19 infections.
The Institute for Supply Management said Wednesday that its service sector index rose to 58.1, up from 57.1 in June. July marks the highest since the index hit 58.5 in February 2019. Any reading above 50 means that the service sector is expanding.
June had been the largest percentage point gain in the history of the services index, which dates to 1997, following the biggest point-drop on record in April.
Those extreme swings followed more than a decade of uninterrupted expansion.
Earlier this week, the ISM reported that its index that tracks the manufacturing sector rose to a reading of 54.2 in July, up from a June reading of 52.6.
The advance in the services index in July was driven by solid gains in new orders and business activity which helped offset a decline in the index measuring employment.
But the services sector is labor intensive. With indoor capacity limited by ongoing coronavirus restrictions in multiple states, Anthony Nieves, chair of the ISM services survey committee, said many employers will not be bringing rehiring workers.
“We will probably see growth in the services sector in coming months but until we can get the restrictions lifted and a vaccine coming out, the growth will likely be incremental,” Nieves said.