Service sector and consumer confidence both fell in April, while the yield curve inversion narrowed, said 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
May 2024

2. Source: Institute for Supply Management, Haver Analytics
As of 5/3/2024
ISM Services: Services PMI Composite Index
Seasonally adjusted, 50+ = Increasing
The Service
Sector
Risk
Level

3. The Service Sector continued
• Service sector confidence fell in April, as the index dropped
from 51.4 in March to 49.4 in April.
• This marks three consecutive months of falling confidence.
• This decline brought the index into contractionary territory for
the first time since December 2022.
• We have downgraded this indicator to red due to the index's
decline into contractionary territory.
Risk
Level

4. Source: Bureau of Labor Statistics, Haver Analytics
As of 5/3/2024
All Employees: Total Nonfarm
% Change – Year to Year, Seasonally adjusted
Private
Employment:
Annual
Change
Risk
Level

5. Private Employment: Annual Change continued
• 175,000 jobs were added in April, following an upwardly
revised 315,000 jobs in March.
• This marks 40 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 4/30/2024
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 in April, due to a rise in
long-term interest rates. The 10-year Treasury yield rose from
4.20% to 4.69%.
• The 3-month Treasury yield ended the month unchanged
at 5.46%.
• This marks 19 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 4/30/2024
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 fell from 103.1 in March to 97.0 in April.
• Consumer confidence fell 6.46 percent on a year-over-year
basis in April, marking two consecutive months of declining
year-over-year confidence.
• Given the continued year-over-year decline, we have
downgraded this indicator to yellow with the potential for
further downgrades ahead.
Risk
Level

10. Conclusion: Slower Economic Growth Ahead
• The data releases in April showed signs of continued but slower
economic growth.
• The strong hiring growth was a positive development.
• Given the declines during the month, service sector and
consumer confidence are worth monitoring going forward.
• 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