Service sector rebounds in June in positive sign for Friday jobs report

Service-sector activity and hiring surged in June, signaling Friday's employment report could reveal a strong rebound in job growth after two dismal monthly showings.

The Institute for Supply Management’s non-manufacturing index rose to 56.5 in June from 52.9 in May, well above the 53.3  ​forecast by economists in a Bloomberg survey. A reading above 50 indicates the sector is growing.

A measure of employment increased to 52.7 from 49.7. The latter was a weak reading that indicated a possible fall in employment. Service employment is a good barometer of the labor market as the sector makes up about 80% of the economy.

Other components of the index also posted strong gains. The business activity index gained 4.4 percentage points from May to 59.5 in June. New orders gained 5.7 points to 59.9. Supplier deliveries slowed to 54, but that's a sign that demand picked up and vendors couldn’t fill orders as quickly.

The report shows growth in 15 services industries and contraction in three.

The ISM index has indicated consistent growth in the service sector since 2010, but it slowed in the first half of 2016, raising concerns that the manufacturing slump had ripple effects on services companies.

Economists expect Friday’s jobs report to show 180,000 jobs added in June.