The US services sector expanded in July after contracting a month earlier by the most in four years, which may help allay fresh concerns about a broad slowing in the economy.

The Institute for Supply Management’s index of services rose 2.6 points to 51.4. Readings above 50 indicate expansion, and the July figure was slightly firmer than the median projection in a Bloomberg survey of economists.

The gauge was boosted by rebounds in services employment, orders and business activity that suggest the largest part of the economy is growing at a modest pace. Reports last week showing a weakening labor market and a slump in manufacturing spurred recession concerns and battered global financial markets.

The S&P 500 climbed to a session high, while Treasury yields rose after the figures.

The ISM’s services employment gauge expanded for the first time since the start of the year and at the fastest pace since September. The survey results follow government data on Friday that showed the jobless rate climbed to an almost three-year high of 4.3%, while payrolls growth slowed markedly.

The jobs report raised odds the Federal Reserve will resort to more aggressive interest-rate cuts through the end of the year.

Also last week, ISM data showed the biggest contraction in manufacturing in eight months. The group’s production index dropped to a more than four-year low, and factory employment shrank the most since the aftermath of the pandemic.

Business Activity

The ISM’s service business activity index — which parallels the group’s factory output gauge — rose nearly 5 points last month after registering the steepest one-month slide since April 2020. A measure of orders placed with service providers also moved back into expansion territory.

“Survey respondents again reported that increased costs are impacting their businesses, with generally positive commentary on business activity being flat or expanding gradually,” said Steve Miller, chair of the ISM Services Business Survey Committee. “Comments continued to express a wait-and-see attitude regarding the upcoming presidential election.”

Ten industries reported growth in July, led by entertainment and recreation, accommodation and food services, mining, and construction. Eight industries reported a decrease in activity.

At the same time, a gauge of prices paid by service providers increased 0.7 point to 57 in July, in line with the average over the past year.

Order backlogs at services expanded slightly last month after plunging in June, while export orders grew at a faster pace.

(With assistance from Chris Middleton.)