updated 6/3/2010 10:56:09 AM ET 2010-06-03T14:56:09

The U.S. service sector expanded in May for the fifth consecutive month, suggesting the economy will add more jobs and strengthen.

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The Institute for Supply Management, a trade group of purchasing executives, said Thursday that its service index was unchanged at 55.4 in May, the same level as April and March. A level above 50 indicates growth.

ISM also says its jobs measure increased, reversing 28 months of contraction. Employers "are now starting to feel a bit more confidence as far as bringing back some jobs," said Anthony Nieves, a Hilton Worldwide executive who serves as chairman of ISM's non-manufacturing business survey committee.

The service sector is key for the economy as it accounts for about 80 percent of U.S. jobs excluding farmworkers. It includes jobs in such areas as health care, retail and financial services. The service sector has lagged behind the much smaller manufacturing sector in the recovery. Some economist said the level of growth last month wasn't fast enough to help the sector catch up.

"This report was somewhat disappointing in that while continuing to show expansion, there is little upward momentum" in the economy apart from manufacturing, wrote James Marple, senior US economist with TD Bank.

ISM said its measure of business activity rose for the sixth consecutive month. A measure of new orders dipped but still indicated growth. New orders signal future business.

Sixteen of the 18 industries ISM surveys said they grew in May. They were led by arts and entertainment, real estate, the information sector, agriculture, and management and back-office support services companies. The two that shrank were education, health care and social services.

The sector is highly dependent on consumer spending, which powers about 70 percent of the economy. Consumer spending was stagnant in April, the weakest showing in seven months, the government said last week.

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