Hiring remained strong in June, and both service sector and consumer confidence improved, 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
July 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 improved, with the index rising from
50.3 in May to 53.9 in June.
• This result left the index in expansionary territory for the sixth
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
• 209,000 jobs were added in June, which was slightly below the
230,000 jobs that were projected.
• This marks 30 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 June. The
3-month Treasury yield dropped from 5.52% at the end of May
to 5.43% at the end of June. The 10-year Treasury yield
increased from 3.64% to 3.81%.
• This now marks nine 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 rebounded in June, with the index rising
from 102.5 in May to 109.7 in June. This brought the index from
its lowest point this year to its highest point in a single month.
• On a year-over-year basis, confidence increased 11.48% in June,
breaking a streak of 15 consecutive months of declining
year-over-year confidence.
• Given the improvement of the index during the month and on
a year-over-year basis, we have upgraded this indicator to
yellow for now.
Risk
Level

10. Conclusion: A Solid June for the Economy
• June was a solid month for the economy, as the continued job
growth and improved 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