July was a solid month for the economy, as continued job growth and improved consumer confidence were positive developments, says Commonwealth CIO Brad McMillan in his latest Economic Risk Factor Update. For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.

1. The Independent Market Observer
Economic Risk Factor Update
August 2023

2. Source: Institute for Supply Management, Haver Analytics
ISM Services: Services PMI Composite Index
SA, 50+ = Increasing
The Service
Sector
Risk
Level

3. The Service Sector continued
• Service sector confidence declined, with the index dropping
from 53.9 in June to 52.7 in July.
• This result left the index in expansionary territory for the
seventh month in a row after a surprise decline in December.
• We have left the risk level at yellow for now due to the recent
volatility in the index.
Risk
Level

4. Source: Bureau of Labor Statistics, Haver Analytics
All Employees: Total Nonfarm
% Change – Year to Year, SA
Private
Employment:
Annual
Change
Risk
Level

5. Private Employment: Annual Change continued
• 187,000 jobs were added in July, which was up slightly from
the 185,000 jobs that were added in June.
• This marks 31 consecutive months of job growth, highlighting
the current strength of the labor market despite the
challenges created by inflation and the tight labor supply.
Risk
Level

6. Source: Haver Analytics
Spread Between 10-Year U.S. Treasury and 3-Month U.S. Treasury
Yield Curve
(10-Year Minus
3-Month
Treasury Rates)
Risk
Level

7. Yield Curve (10-Year Minus 3-Month Treasury Rates)
continued
• The yield curve inversion narrowed modestly in July. The
3-month Treasury yield rose from 5.43% at the end of June to
5.55% at the end of July. The 10-year Treasury yield increased
from 3.81% to 3.97%.
• This now marks 10 consecutive months with an inverted
3-month 10-year yield curve. While this doesn’t guarantee that
the economy will enter a recession, it’s a widely monitored
technical signal that could indicate further slowdowns.
Risk
Level

8. Source: The Conference Board/Haver Analytics
Conference Board: Consumer Confidence
% Change – Year to Year SA, 1985=100
Consumer
Confidence:
Annual
Change
Risk
Level

9. Consumer Confidence: Annual Change continued
• Consumer confidence improved more than expected in July,
with the index rising from 110.1 in June to 117.0 in July.
• On a year-over-year basis, confidence increased 22.77% in July,
marking two consecutive months of improving
year-over-year confidence.
• Given the index’s improvement during the month and on a
year-over-year basis, we have upgraded this indicator to green
for now. Risk
Level

10. Conclusion: Economy Remains Healthy in July
• July was a solid month for the economy, as continued job
growth and improved consumer confidence were
positive developments.
• Continued economic growth remains the most likely path
forward, but real risks remain in this outlook.
• The path of recovery remains uncertain in the short term, and
caution is still warranted.
Risk
Level

11. Certain sections of this commentary contain forward-
looking statements that are based on our reasonable
expectations, estimates, projections, and assumptions.
Forward-looking statements are not guarantees of future
performance and involve certain risks and uncertainties,
which are difficult to predict. Past performance is not
indicative of future results.
Diversification does not assure a profit or protect against
loss in declining markets. All indices are unmanaged, and
investors cannot invest directly in an index.
The information contained herein is provided for
informational purposes only and is based upon sources
believed to be reliable. No guarantee is made as to the
completeness or accuracy of the information.
Disclosure