Sanofi Pasteur-Pittsburgh, PA
Don Wright/AP Images for Sanofi Pasteur
By Steven C. Johnson

NEW YORK -- Growth in the U.S. service sector cooled last month after approaching an eight-year high in August as the pace of new orders dropped and hiring slowed, according to an industry report released Thursday.

The Institute for Supply Management said its services index fell to 54.4 in September from 58.6 in August which was the highest since December, 2005. A reading above 50 indicates expansion.

September's reading fell short of the 57.4 consensus expectation in a Reuters poll and even undershot the lowest forecast among the 74 economists surveyed.

New orders slipped to 59.6 from 60.5 and business activity fell to 55.1 after scoring 62.2 in August.

Employment, which hit a six-month peak of 57 in August, retreated to 52.7 last month, its lowest level since May.

The report may raise concern about the U.S. economy's momentum in the final quarter of the year and could feed speculation that the Federal Reserve won't start to wind down its stimulus program before year end.

The ISM's manufacturing report Tuesday, however, showed the goods-producing sector expanded at its fastest pace in nearly 2½ years.

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