U.S. service industries contracted in January at a slower pace than forecast as the slump in orders cooled. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 42.9 from 40.1 in December. Readings below 50 signal contraction. Other reports today showed the labor market deteriorated further last month. “There are still a whole lot of companies out there saying things are bad, but maybe it’s not getting worse,” Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. The report “still paints a very weak economy.” A record spending slump has forced retailers including Macy’s Inc. and Starbucks Corp. to cut thousands of jobs, contributing to deterioration in confidence that’s likely to prompt further pullbacks. The recession is projected to deepen after the world’s largest economy contracted last quarter at the fastest pace in 26 years. Economists forecast the Tempe, Arizona-based ISM’s services gauge would fall to 39, according to the median of 65 projections in a Bloomberg News survey. Estimates ranged from 35 to 44. Companies in the U.S. cut an estimated 522,000 jobs in January, a 12th consecutive reduction, a report from ADP Employer Services today showed. Job cuts announced by U.S. employers more than tripled last month from a year earlier, led by cutbacks at retailers following the worst holiday-shopping season in four decades, the Chicago-based placement firm Challenger, Gray & Christmas Inc. also said today.

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