(Bloomberg). — U.S. service provider growth eased in April, but cost pressures increased. This highlights how long-standing inflation and the ongoing struggle to retain and hire workers are weighing heavily on this sector.

The Institute for Supply Management’s gauge of services decreased to 57.1 last month from 58.3 in March, according to data out Wednesday. Any readings higher than 50 indicate expansion. In a Bloomberg survey, economists expected a modest improvement to 58.5.

In April, the index of price paid by companies for services and materials jumped to an all-time high of 84.6. This indicates that inflation in America is still on the rise. The rising costs of service providers will be passed on to their customers, as they often work with very small margins.

“Business activity remains strong; however, high inflation, capacity constraints and logistical challenges are impediments,”  Anthony Nieves, chair of the ISM Services Business Survey Committee, said in a statement.

Construction, utilities, and management of companies, as well as support and services, led 17 industries to report growth.

Amid high prices, ISM’s gauge of new orders growth pulled back to softest pace since February of last year. However, all other indicators indicate strong consumer demand. Business activity rose to a three-month high, and the group’s measure of imports expanded. 

Employment in Services

In the meantime, there was a second contraction in employment activity over three months. It was 49.5, down from 54 in April. This shows the difficulty of finding sufficient workers to fulfill demand. 

ADP Research Institute released separate data Wednesday showing that small business employment fell last month and that there was a slowdown in private hires.

Many service providers offer higher pay, but the market for employees remains tough. Nationally, unemployment and quitting are at an all-time high.

According to government data, the U.S. added 385,000 jobs last April according to Friday’s release. 

This report shows that orders backlogs have decreased in recent months and inventory has improved. This month, the inventory gauge reached its highest point in nearly a decade.

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