The US services sector expanded at a modest pace for a second month in August as a measure of employment effectively stagnated and order backlogs slumped.

The Institute for Supply Management’s index of services was little changed at 51.5. Readings above 50 indicate expansion. The employment index slipped to 50.2 during the month, according to the figures issued Thursday.

After improving slightly in July, the group’s order backlogs measure slumped nearly seven points, the most since April 2020 when the pandemic stifled business activity. While the index is volatile, the contraction in backlogs over two of the last three months risks prompting companies to adjust headcount and worker hours.

Government figures out Wednesday showed job openings dropped to the lowest level since the start of 2021, while the number of layoffs picked up in July. The vacancies data, combined with a fifth month of contracting manufacturing activity, illustrate softer economic growth.

The ISM survey precedes government data on Friday that is forecast to show a moderately faster pace of payrolls growth in August after one of the weakest gains since the pandemic. Even with the expected pickup, the three-month average gain would be the smallest since 2021.

The ISM’s service business activity index - which parallels the group’s factory output gauge - expanded at a slower pace while new orders expanded only slightly faster than a month earlier.

“Slow-to-moderate growth was cited across many industries, while ongoing high costs and interest-rate pressures were often mentioned as negatively impacting business performance and driving softness in sales and traffic,” Steve Miller, chair of the ISM Services Business Survey Committee, said in a statement.

Ten industries reported growth in August, led by entertainment and recreation, mining and transportation and warehousing. Seven sectors indicated a decrease, including retail trade, construction and accommodation and food services.

  - Bloomberg