The strong job growth was encouraging in December, says Sam Millette, director, fixed income, 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
January 2024

2. Source: Institute for Supply Management, Haver Analytics
As of 1/05/2024
ISM Services: Services PMI Composite Index
Seasonally adjusted, 50+ = Increasing
The Service
Sector
Risk
Level

3. The Service Sector continued
• Service sector confidence fell to end the year, as the index
dropped from 52.7 in November to 50.6 in December.
• This result left the index in expansionary territory for the
twelfth consecutive month despite the decline.
Risk
Level

4. Source: Bureau of Labor Statistics, Haver Analytics
As of 1/05/2024
All Employees: Total Nonfarm
% Change – Year to Year, Seasonally adjusted
Private
Employment:
Annual
Change
Risk
Level

5. Private Employment: Annual Change continued
• 217,000 jobs were added in December, which was up from the
downwardly revised 179,000 jobs added in November.
• This marks 36 consecutive months of job growth, highlighting
the current health of the labor market despite the challenges
created by inflation and the tight labor supply.
Risk
Level

6. Source: Haver Analytics
As of 12/29/2023
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 widened in December, due to a sharp
fall in long-term interest rates. The 3-month Treasury yield fell
from 5.45% at the end of November to 5.40% at the end of
December. The 10-year Treasury yield fell from 4.37% to 3.88%.
• This now marks 15 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
As of 12/20/2023
Conference Board: Consumer Confidence
% Change – Year to Year Seasonally adjusted, 1985=100
Consumer
Confidence:
Annual
Change
Risk
Level

9. Consumer Confidence: Annual Change continued
• Consumer confidence surged from 101.0 in November to 110.7
in December. This result brought the index to a 5-month high.
• On a year-over-year basis and despite the improvement,
confidence only increased 1.56% in December.
Risk
Level

10. Conclusion: Economic Growth Continues
• The data releases in December showed signs of continued
economic growth.
• The strong hiring and improved consumer confidence signaled
solid momentum for the economy.
• The drop in service sector confidence and widened yield curve
inversion indicated that potential economic risks remain.
• 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