The US services sector kept its expansion streak alive in June, posting its 24th consecutive month of growth. The ISM Services PMI came in at 54.0 for June, according to the report issued by Steve Miller, Chair of the ISM Services Business Survey Committee. That’s a slight dip from May’s 54.5 reading, but still comfortably above the 50 line that separates expansion from contraction.

The employment comeback

The employment subindex jumped to 51.2, up from 47.9 in May. That’s the first time the hiring gauge has crossed back into expansion territory since February. Three consecutive months of contraction in employment had started raising eyebrows about whether the labor market was finally cracking. June’s data suggests the answer, at least for now, is no.

Inflation pressures take a breather

The prices paid index fell to 67.7 from 71.3 in May. That’s the lowest reading in four months, and it represents a meaningful cooldown in what companies are shelling out for inputs, materials, and labor. Earlier in the year, geopolitical tensions in the Middle East had pushed price pressures higher across supply chains. The June data suggests those effects are fading.

Business activity came in at 55.4, while new orders registered at 55.1. Both eased slightly from May but remained firmly in expansion territory.

What this means for the Fed

A labor market that’s adding jobs without overheating, combined with easing cost pressures, removes one of the key objections to Fed rate cuts: that services inflation was still running too hot to justify easing. Investors should watch the next ISM Services PMI report, scheduled for August, alongside upcoming Federal Reserve communications.