NEW YORK (Reuters) - The U.S. economy’s service sector expanded in February but at a slightly slower pace than the previous month and employment in the sector declined for the first time in two years, according to an industry report released on Thursday.

A waitress serves a steak and fried shrimp combo plate to a customer at Norms Diner on La Cienega Boulevard in Los Angeles, California May 20, 2015. REUTERS/Patrick T. Fallon

The Institute for Supply Management (ISM) said its index of non-manufacturing activity fell to 53.4 from 53.5 the month before. The reading was just above expectations of 53.2 from a Reuters poll of 81 economists.

A reading above 50 indicates expansion in the service sector and a reading below 50 indicates contraction.

The business activity index rose to 57.8 from 53.9 the month before. That was just above expectations of 54.0.

The employment index fell to 49.7 from 52.1 a month earlier, marking the first fall in service-sector employment since February 2014. New orders dropped to 55.5 from 56.5. The prices paid index fell to 45.5 from 46.4.

The U.S. economy’s manufacturing sector contracted in February but at a slower pace than the previous month, according to an earlier ISM report.

OPTIONAL TABLE

RIC Month Actual Reuters Prior

Poll

ISM Non-Manuf. PMI USNPMI=ECI February 53.4 53.2 53.5

ISM Non-Manuf. Prices Paid USPPMI=ECI February 45.5 N/A 46.4

ISM Non-Manuf. New Orders USDPMI=ECI February 55.5 N/A 56.5

ISM Non-Manuf. Bus. Activity USOPMI=ECI February 57.8 54.0 53.9

ISM Non-Manuf. Employment USEPMI=ECI February 49.7 N/A 52.1