As of 2024, the services sector makes up more than 77% of the U.S. economy. That’s why it’s worth paying attention to the fact that services have been pulling back sharply this year, contracting at its fastest rate in four years as of June per the ISM index, which fell 5 points last month.
That’s not all.
ISM’s business activity index also fell 11.6 points in June, its steepest decline since April 2020, while employment in services contracted for the fifth consecutive month.
In response, the Federal Reserve has been hinting at interest rate cuts, driving Treasury yields down in recent weeks that have helped boost the stock market.
Taken together, this contraction in the services sector signals broader implications for the U.S. economy. Fewer jobs and less activity in a major part of GDP could have not only far-reaching impacts on service providers themselves, but also the millions of Americans who work for those companies, sending ripple effects throughout the economy.
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