Economic activity in the US nonmanufacturing sector expanded in July at a notably slower pace than in June, according to the Institute for Supply Management’s nonmanufacturing index, released today. ISM’s nonmanufacturing index fell in July to a reading of 53.9 from June’s reading of 57.4 and represents continued growth in the nonmanufacturing sector but at a slower rate.

The employment portion of the index fell to a reading of 53.6 in July, down 2.2 percentage points from 55.8 in June.

Any reading above 50% generally indicates improving conditions.

Bloomberg reports America’s service industries expanded in July at the weakest pace in almost a year, indicating firms making up the biggest part of the economy tempered their optimism. The index was below the lowest estimate in its survey, where forecasts ranged from 54.9 to 59.0.

Separately, the US four-week moving average of initial claims for unemployment insurance fell to 241,750 last week, down 2,500 from the previous week’s average, according to seasonally adjusted numbers released today by the US Department of Labor. The previous week’s average was revised slightly upward by 250.

The four-week moving average decreases the volatility of the weekly numbers. Total initial claims for unemployment insurance for the week ended July 29 fell to 240,000, down 5,000 from the previous week’s level which was revised upwards by 1,000.

Reuters reports the decrease points to a tightening labor market that likely keeps the Federal Reserve on course to announce plans next month to start reducing its massive bond portfolio. “The labor market remains tight as a drum even if it is not throwing off the sparks of higher wages and more inflation,” it quoted Chris Rupkey, chief economist at MUFG in New York, as saying. “The Fed can continue mopping up the stimulus provided to fight the financial crisis and recession.”