A key part of America’s economy has shifted into reverse

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A vast swath of the US economy is showing signs of weakness as unemployment rises to its highest point in more than two years.

Consumer demand seems to have tapered off so far this summer, according to surveys of American businesses that sell any kind of service to make a profit, ranging from restaurants to dental clinics. That weakness is also evident in the latest spending figures — a far cry from last year’s lucrative summertime spending spree when Americans shelled out for films and high-profile concerts.

The Institute for Supply Management’s latest monthly survey that gauges economic activity in the services sector showed that so-called new orders and overall economic activity unexpectedly slipped into contraction territory last month. The headline index fell to a reading of 48.8 in June from 53.8 in May as the new orders sub-index saw an even steeper decline, down to 47.3 from 54.1. (A reading above 50 indicates expansion while anything below that threshold points to a contraction.)

This apparent slowdown in demand, if it persists for long enough, could translate into service-providing businesses hiring at a slower pace and possibly slashing jobs. The overwhelming majority of employment in the United States is considered service-providing, specifically 86% of the 158.6 million total USjobs as of June.

“When you think of services, a lot of it is driven by the consumer, and consumers are key to where the US economy goes,” James Knightley, chief international economist at ING, told CNN.