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Last Updated, Jun 3, 2021, 5:00 PM
Services Boom? You Ain’t Seen Nothing Yet


Warmer weather made Covid-19 workarounds like outdoor dining easier.



Photo:

David Paul Morris/Bloomberg News

If you think the service economy is growing full-bore now, just wait to see what happens next.

The Institute for Supply Management on Thursday reported that its index of services activity rose to 64 in May from 62.7 in April, registering the highest level in its 24-year history. Anything over 50 indicates expansion.

The details of the report were uniformly strong. All 18 of the services industries surveyed by ISM reported growth, and underlying indexes on the current pace of business, orders and employment were all solid. It was also clear that services industries are having a hard time keeping up, with order backlogs piling up, supplier deliveries slowing and labor and commodities often hard to secure.

Considering the progress made in the fight against the pandemic, as well as anecdotal reports on the economy and what you can see with your own eyes, the strength of the services sector isn’t surprising. The share of U.S. adults who are fully vaccinated against the novel coronavirus rose to 51% at the end of last month from 39% at the end of April, according to the Centers for Disease Control and Prevention, and the country recorded less than half as many new Covid-19 cases in May as in April.

Also in May, the CDC said that fully vaccinated people need not wear masks in most settings, leading states to relax restrictions, while warmer weather made Covid-19 workarounds like outdoor dining easier.

But the boom is really only beginning. This month even more people will get their shots, including many children aged 12-15 who became eligible for vaccination last month. If the experience of the U.K. and Israel holds, where greater shares of the population have been vaccinated, new Covid-19 cases, hospitalizations and deaths in the U.S. will fall significantly over the next several weeks.

That in turn will make people feel even more comfortable going out, heading back into the office, getting haircuts, gathering with friends and family and taking trips. The demand service-sector businesses are now experiencing will get more pitched, and the race to secure materials and labor more heated. All parties end, but this one is just getting started.

Write to Justin Lahart at justin.lahart@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the June 4, 2021, print edition as ‘Service-Sector Party Is Just Starting.’

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