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Service companies expanded in May

WASHINGTON — U.S. service companies, which employ roughly 90 percent of the work force, grew at a slightly faster pace in May, marking the 29th straight month of expansion.

The Institute for Supply Management said Tuesday that its index of non-manufacturing activity edged up to 53.7 last month from an April reading of 53.5.

The May reading was slightly below the long-run average for the index of 53.9. A reading above 50 indicates expansion.

Economists were happy to see that the new orders component of the index rose in May because that is a good sign that demand will be solid in coming months. But there was concern that the employment component, while remaining in expansion territory, slipped to the lowest reading since November.

Jennifer Lee, senior economist at BMO Capital Markets, noted that only 13 of 18 industries reported growth in May, the smallest total since the number stood at 12 in January.

But she said it was a relief that the non-manufacturing part of the economy “didn’t take as much of a hit” as manufacturing appeared to take this spring with orders to U.S. factories falling in March and April.

The ISM survey covers all sectors outside of manufacturing. That includes retail, construction, financial services, health care and hotels.

It reached the highest point in 12 months in February, when it was 57.3.

The ISM’s manufacturing index, released last week, showed that manufacturing grew more slowly in May, hampered by weaker hiring and declining production. But in a hopeful sign, new manufacturing orders hit a 13-month high.

The service sector includes low-paying positions in retail and restaurants. But it also has higher-paying jobs in professions such as information technology, accounting and financial services.

The government reported Friday that the overall economy added just 69,000 jobs in May, the smallest number in a year, while the unemployment rate edged up from 8.1 percent to 8.2 percent. The dismal report on jobs heightened fears that the economy is struggling. Economists are concerned that the economy could hit a soft patch this year just as it did in 2010 and 2011.