* ISM services sector index falls 0.8 pt to 53.9 in November
* Business activity index tumbles 5.4 pts to 51.6
* New orders, employment measures increase
* Private payrolls rise 67,000 in November
WASHINGTON, Dec 4 (Reuters) - U.S. services sector activity slowed in November as lingering concerns about trade tensions and worker shortages pushed production to its lowest level in a decade, which could heighten fears about the economy's health.
Other data on Wednesday showed private employers hired the fewest workers in six months in November. The reports came on the heels of data on Monday showing manufacturing activity contracted for the fourth straight month in November and a decline in construction spending in October.
The continued manufacturing slump and second straight monthly drop in construction outlays tempered growth expectations for the fourth quarter, which had been boosted by a rush of upbeat reports on the trade deficit, housing and business investment. Still, the economy appears to be growing at a moderate pace rather than stalling.
Growth is being constrained by the Trump administration's "America First" policy, which has seen the United States embroiled in a trade war with China, and tit-for-tat tariffs with other nations. The trade tensions, which have eroded business confidence, come as the stimulus from last year's $1.5 trillion tax cut package is fading.
The Institute for Supply Management (ISM) said its non-manufacturing activity index fell to a reading of 53.9 last month from 54.7 in October. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity.
Economists polled by Reuters had forecast the index dipping to a reading of 54.5 in November. The survey's production index tumbled 5.4 points to 51.6, the lowest level since November 2009, as tariffs on imports, including steel and aluminum raised costs for businesses. A measure of prices paid by services industries jumped 1.9 points to 58.5 last month.
"The decline in the index in November seems to reflect the tariffs that are impacting the prices of many products that services companies use to provide their services to other companies and consumers," said Chris Rupkey, chief economist at MUFG in New York. "China is not paying for all the tariffs apparently."
President Donald Trump has repeatedly claimed that China was paying the tariffs in the 17-month trade war.
The dollar fell against a basket of currencies, while U.S. Treasury yields rose. Stocks on Wall Street were trading higher.
LABOR MARKET SLOWING
The ISM said services industry businesses "hope for a resolution on tariffs and continue to be hampered by constraints in labor resources." It said 12 industries, including retail trade, utilities and information, reported growth last month. Five industries, including agriculture, mining and construction reported a contraction.
But key details of the ISM survey were upbeat. New orders picked up last month, though order backlogs contracted.
A measure of services industry employment rose to 55.5 from 53.7 in October. This supports economists' expectations that the government's closely watched employment report on Friday would show a sharp rebound in job growth in November, despite the paltry job gains reported by private employers last month.
Private employers added only 67,000 jobs in November, the ADP National Employment report showed on Wednesday. It was the smallest monthly gain since May when just 46,000 jobs were created, the fewest since 2010, and continued a trend of decelerating job growth that has taken hold this year.
Data for October was revised down to show private payrolls increasing 121,000 from an originally reported 125,000 gain.
Economists polled by Reuters had forecast private employment rising by 140,000 jobs in November.
The ADP figures come ahead of the Labor Department's more comprehensive nonfarm payrolls report due out on Friday, which includes both public- and private-sector employment.
According to a Reuters survey of economists, nonfarm payrolls probably increased by 180,000 jobs last month, boosted in part by the return of about 46,000 General Motors workers who had been excluded while on a 40-day strike. The strike held down job growth to 128,000 in October. The unemployment rate is forecast unchanged at 3.6% in November.
The ADP report, which is jointly developed with Moody's Analytics, has a poor record predicting the private payrolls component of the government's employment report. Economists said the ADP job count was not affected by the resumption of work by the GM workers. Still, last month's private payroll gains pointed to a cooling labor market.
"This report adds to signs that the labor market is still losing momentum, suggesting that incomes growth and thus real consumption growth will slow a little further in the near term," said Michael Pearce, a senior U.S. economist at Capital Economics in New York. "But it would take a much sharper downturn in employment growth to raise recession fears."
Job gains have averaged 167,000 per month this year, above the roughly 100,000 needed each month to keep up with growth in the working age population.
In the wake of Monday's dour ISM manufacturing survey and October construction spending, economists slashed their gross domestic product growth estimates for the fourth quarter to as low as a 1.3% annualized rate from as high as a 2.0% pace. The economy grew at a 2.1% pace in the third quarter.
The U.S.-China trade war has undercut business investment, contributing to the manufacturing downturn.
Washington and Beijing are working on a "phase one" trade deal. Trump, however, said on Tuesday a deal might have to wait until after the U.S. presidential election in November 2020. Trump on Monday restored tariffs on steel and aluminum imports from Brazil and Argentina for "massive devaluation of their currencies."
The United States also threatened duties of up to 100% on French goods, from champagne to handbags, because of a digital services tax that Washington says harms U.S. tech companies.