The positive results in June were welcome given monthly volatility in this measure to start the year. The labor market appears to be relatively healthy given the low levels of job openings and high levels of voluntary exits, which are often associated with tight labor conditions. While we will continue to monitor the headline job creation numbers, June’s healthy results, and the continued strength of the longer-term numbers, indicate that the overall employment situation remains a green light.

Yield Curve (10-Year Minus 3-Month Treasury Rates)


Signal: Green light

The yield curve flattened further in June. This was driven by lower inflation data that depressed the intermediate and long portions of the curve, as well as the Fed’s decision to raise short-term rates in mid-June. The Fed’s decision was widely seen as validation of the strength of the economy; however, the increase in the short-term rates flattened the yield curve to levels not seen since early 2008.

Although the spread between the 10-year and 3-month rates remains well outside of the risk zone, the fact that it is now at post-crisis lows suggests that caution is warranted. I am leaving this measure at green for now, but I will be keeping an eye on it given the downward trend.

Consumer Confidence: Annual Change


Signal: Green light

Consumer confidence increased slightly in June, following decreases in the previous two months, and remains near 16-year highs. This high level of consumer confidence bodes well for second-half growth. On an annual basis, the trend is also positive, with a significant increase over that time. Overall, this measure is a green light.

Conclusion: Economy healthy, positive trends improve

Continued high levels of consumer and business confidence support expectations for future growth, while a strong jobs report suggests that the hard data may be improving as well. Although there are some concerns over trends in the data, as well as weaker reports earlier in the year, the economy remains on track overall, and we conclude at a green light for this month.