MNI INTERVIEW: US Service Sector Hiring In First 2021 Dip -ISM

Service-sector hiring stumbled through June, falling for the first time in six months as employers struggled to fill open positions and former service workers found employment is less risky industries, ISM survey chair Anthony Nieves told MNI Tuesday.

Difficulties in hiring is "absolutely" weighing on the service sector's ability to recover fully from Covid-19 shutdowns, Nieves said, and even though businesses like restaurants are able to open at full capacity in many areas for the first time since last March, a shortage of available workers is inhibiting their ability to do so.

The ISM employment index sank six points to 49.3, falling below the 50 point benchmark that signals growth for the first time since December, a decline anticipated by last week's Business Barometer released by the Chicago ISM and MNI.

Some respondents in the ISM survey said demand for services is returning "too quickly" to pre-pandemic levels, and many businesses, particularly in accommodation and food services, aren't able to get staffing levels high enough to keep up.

Service providers through June continued to offer higher, more competitive wages for traditionally lower-paying jobs to attract workers, Nieves said, with some business owners offering incentives just to fill out a job application or show up for an interview.

Job seekers "are very picky right now because they have choices," he said. "There are so many openings out there and they're looking for the best. It's an ongoing battle [for employers] right now."

Nieves added that many former service workers have left the service sector for good, finding new work in more stable industries like manufacturing, despite other ISM officials recently pointing to higher pay in the service sector taking staff away the industrial sector.

INFLATIONARY PRESSURES

Higher wages are feeding into inflation, Nieves said, as is production capacity, which is still down substantially even as demand returns and "things are starting to get back to normal."

"Demand is strong and there are so many backorders right now," he said. Rising costs of materials like lumber and fuel are also driving prices higher.

Some providers are also "taking advantage" of elevated demand, he added, and are increasing the costs of their services because they know consumers are still more than likely to spend after more than a year of restrictions on in-person activities.

The June ISM prices index edged lower to 79.5 from 80.6 in May, indicating that prices continued to increase although at a moderately slower rate.