Service industries grew in July at the slowest pace in five months as a lack of jobs hemmed in U.S. consumers, economists said before reports today. The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, fell to 53 from 53.8 in June, according to the median forecast of 76 economists surveyed by Bloomberg News. Readings above 50 signal expansion. Another report may show companies took on less staff than in prior months. Retailers like OfficeMax Inc. are predicting sales will suffer as an unemployment rate that is projected to hover near 10 percent forces companies to discount merchandise. Combined with an easing in manufacturing, the slowdown means the recovery from the worst recession since the 1930s will probably cool in the second half of the year. “Things are moderating somewhat,” said Jay Feldman, an economist at Credit Suisse in New York. “It’s a very slow recovery by prior standards.” The Tempe, Arizona-based ISM’s report is due at 10 a.m. in New York. Survey estimates ranged from 51.5 to 54.7. A report from ADP Employer Services at 8:15 a.m. may show private payrolls rose by 30,000 in July after increasing by 13,000 in June and by an average 61,000 in the prior two months, according to the survey median. Employment Forecast The Labor Department in two days may report private payrolls grew by 90,000 last month while total employment fell by 60,000, reflecting the dismissal of temporary government workers as the decennial census wound down, according to the median estimate of economists surveyed. Unemployment rose to 9.6 percent from 9.5 percent, the survey showed. OfficeMax, the third-largest U.S. office-supply chain, yesterday forecast sales will decline this quarter. Chief Financial Officer Bruce Besanko said sales of back- to-school materials will be “extremely tough” as families limit spending. “Customers will be budget-conscious and retailers will be competitive and promotional” Besanko said in a telephone interview yesterday. The Standard & Poor’s Supercomposite Retailing Index has fallen 18 percent since a 19-month peak on April 26, compared with an 8 percent decline in the broader S&P 500 gauge from its 19-month peak on April 23. Federal Reserve Chairman Ben S. Bernanke this week gave an upbeat assessment on the outlook for consumers, projecting spending would climb as wages rose. Bernanke’s View While the U.S. has “a considerable way to go” for a full recovery, “the economy seems to have stabilized and is expanding again,” Bernanke said in a speech in Charleston, South Carolina. The ISM services survey covers industries that range from utilities and retailing to health care, housing and finance. The group’s factory survey earlier this week showed manufacturing grew last month at the slowest pace of the year. Data from the Commerce Department yesterday showed consumer spending and personal income were unchanged in June, further evidence the weak jobs recovery is hurting spending. Household purchases grew at a 1.6 percent rate in the second quarter, while the economy expanded at a less-than-forecast 2.4 percent pace, the government reported last week. The outlook for jobs is one reason consumer confidence sank more than forecast in July, according to a Conference Board report last week.

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