The data for June was generally positive, with a rebound in job growth and a surprise increase in business confidence supported by continued high levels of consumer confidence. After a run of weak data in the past couple of months, the June rebound is a good sign. Although there is still a gap between confidence and actual hard data, the persistence of confidence suggests that most economic factors remain positive—and that the current expansion is likely to continue.
The Service Sector
Signal: Green light
The ISM Nonmanufacturing Index surprised by rising in June, despite expectations of a small decline. This increase offset a modest decline in May. As a diffusion index, readings above 50 indicate expansion, and readings below 50 indicate contraction. After some weakness in late 2016, this index has registered increasing business confidence, so it remains a green light.
Private Employment: Annual Change
Signal: Green light
June job creation beat expectations, with 222,000 jobs added against expectations of 178,000. In addition, May’s disappointing results were revised up to a healthy 152,000 new jobs. The underemployment and unemployment rate both ticked up slightly during the month, but even this was positive, as the increases were driven by a bump in the labor force participation rate.
Because this is an annual figure, changes are slower and smaller than those we see in more frequently reported data. The major thing to watch here is the trend, which indicates slowing job growth over time. Despite the slowing trend, job growth is still quite positive overall, so this indicator remains a green light.
Private Employment: Monthly Change
Signal: Green light
These are the same numbers as in the previous chart but on a month-to-month basis, which can provide a better short-term signal.