Once again, it’s time for our monthly update on risk factors that have proven to be good indicators of economic trouble ahead. After flashing a yellow light for the last several months, the change in consumer confidence indicator has declined even further, moving closer to the worry zone. Some signs of weakness are also appearing in other areas, such as the yield curve indicator.

For the economy as a whole, the risk still does not appear to be immediate, but it is rising. That said, many of the signs of a slowdown may be passing on a forward-looking basis, so my overall outlook remains positive—although less so than it was a couple of months ago.

The Service Sector

Signal: Green light

This metric dropped last month, but only very slightly, which may well be a sign of stabilization following the weakness of late last year. The ISM Non-Manufacturing Index remains in positive territory but close to the lower levels of this recovery. While continuing to expand, the service sector has been affected by negative news from the manufacturing sector here in the U.S. and by concerns around the world.

At this level, we can still expect continued business and employment expansion, and hopefully this month’s near-stabilization will continue. Continued strength in the service sector is consistent with business confidence; as a representative sample of the largest sector of business, this is an important leading indicator.

Private Employment: Annual Change

Signal: Green light

Private employment growth year-on-year continued to decrease slightly, largely because of a weak January report, but it remains at healthy levels, at or above those of the mid-2000s. A very strong monthly figure from February, combined with some positive details in the January report, suggests that the decline in the growth rate may be stabilizing. Because this is an annual figure, the changes are slower and smaller than those we see in more frequently reported data, but the trend continues to look healthy.

Private Employment: Monthly Change

Signal: Green light