More jobs than expected were added in November, and service sector confidence also showed an unexpected improvement, 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
December 2022

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 increased more than expected, as
the ISM Services index rose from 54.4 in October to 56.5 in
November against calls for a decline to 53.5.
• While the November result points toward growth, the index
sits below the recent highs from late last year, signaling
continued headwinds for service sector businesses.
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
• 263,000 jobs were added in November, which was better than
the 200,000 that were projected.
• This marks 23 consecutive months of job growth, highlighting
the current strength of the labor market despite the
challenges created by inflation and labor shortages.
• The unemployment rate remained unchanged at 3.7%.
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 continued to invert in November. The 3-month
Treasury yield increased from 4.22% at the end of October to
4.37% at the end of November. The 10-year Treasury yield fell
from 4.10% to 3.68%.
• This now marks two 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: 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 fell from 102.2 in October to
100.2 in November, marking two consecutive months of
declining confidence.
• On a year-over-year basis, confidence declined 10.46% during
the month, marking 9 consecutive months of declining
year-over-year confidence.
• Confidence remains well below the pandemic-era highs of last
year, and November’s drop bears monitoring.
Risk
Level

10. Conclusion: Growth with Risks Ahead
• November showed signs of continued economic growth despite
inflation concerns and expectations for tighter monetary policy.
• The strong hiring growth during the month was an encouraging
sign, as the job market continues to signal a healthy economy.
• Further economic growth remains the most likely path forward;
however, 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