WASHINGTON -- The U.S. services sector shrank for a second month in May as the coronavirus pandemic triggered shutdowns and layoffs around the country.
Activity did rise from levels last month that had not been seen since the recession.
The Institute for Supply Management said Wednesday that its service sector index stood at 45.4 last month, up slightly from an April reading of 41.8.
Any reading below 50 signals that the service sector, where the majority of Americans work, is in contraction. The April decline broke a string of more than 10 years of expansion in the services sector.
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The continued contraction in service industries followed a similar pattern in the industrial sector. The institute reported earlier this week that manufacturing activity remained in contraction territory in May, with a reading of 43.1, up slightly after registering 41.5 in April.
While manufacturing and service industries improved slightly, economists believe a recovery from the shock of the pandemic could be long and painful.
"While some sectors appear to be recovering fairly rapidly as lockdowns have been eased -- with mortgage applications surging in recent weeks and early reports suggesting auto sales have bounced back -- the institute's non-manufacturing index echoes the message from other surveys that it will take longer for the wider economy to recovery," said Michael Pearce, senior U.S. economist at Capital Economics.
Chris Rupkey, chief financial analyst at MUFG Bank in New York, said it is concerning that the weakest services survey component was employment.
The institute's measure of employment at services, which represent almost 90% of the economy, rose only 1.8 points from the worst reading on record in April.
A Labor Department report on Friday is projected to show another 8 million decline in May payrolls after an unprecedented 20.5 million slump in April. The unemployment rate is forecast to soar to nearly 20%.
"We aren't sure all the old employees are going to find a seat in the new economy," Rupkey said.
Meanwhile, the index of supplier deliveries in non-manufacturing industries fell for the first time in four months, indicating an easing in supply-chain bottlenecks and transportation delays.
Four non-manufacturing industries reported growth in May, including agriculture, while 14 industries, including mining, arts and entertainment and recreation, were in retreat.
Anthony Nieves, chair of the institute's non-manufacturing business survey committee, said social unrest across the country has set back efforts to reopen the economy, with many companies going back into lockdown mode.
"We will have to see how fast the country recovers from the unrest we are seeing now," he said.
Information for this article was contributed by Martin Crutsinger of The Associated Press and by Vince Golle of Bloomberg News.
Business on 06/04/2020