Markit's purchasing managers' index (PMI) for the sector came in at 50.9 in August, down from a score of 51.4 in July and hovering perilously close to the crucial 50 mark which separates growth from contraction.
The survey also indicated employment is growing at its weakest rate since late 2014, denting hopes that the US could post a bumper third quarter of growth after a lacklustre performance in the first six months of the year.
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Despite the poor figures, service firms said they expected a pick-up over the next year, as the wider economy will continues to improve and "hopes of a post-election rebound in client spending".
Chris Williamson, chief business economist at Markit, said: "Anecdotal evidence from the survey suggests that business activity is being dampened by uncertainty due to the upcoming presidential election."
Ahead of US Federal Reserve chair Janet Yellen's crucial speech at Jackson Hole tomorrow, Williamson added: "With job creation also waning alongside subdued price pressures, the survey data will fuel expectations that the Fed will be in no rush to tighten policy again."
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