Once again, it’s time for our monthly update on risk factors that have proven to be good indicators of economic trouble ahead. As expected, the data hasn’t changed much from last month—it remains positive in almost all areas and has continued to improve in many cases—but it’s still important to keep an eye on things.
As we continue into the year, though, the economic forecast remains promising.
Signal: Green light
After dropping two months ago, this data point rebounded a bit and remains close to its highest level since before the financial crisis. 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.
Signal: Green light
Private employment growth year-on-year continued to increase, moving up to the highest level since 1998. 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 be in the right direction.
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. Despite severe winter weather, employment remains at a monthly growth level consistent with the mid-2000s (unlike what we saw in early 2014). Total employment growth continues to be healthy.
Signal: Green light
Rates for the 10-year Treasury ticked up over the past month, while 3-month rates stayed relatively stable, widening the spread. Nonetheless, the spread between long-term and short-term rates remains at healthy levels. This metric has not changed significantly despite the start of Japanese and European central bank quantitative easing programs, which have created demand from international buyers.
Signal: Green light
Consumer confidence dropped this month but remains well above levels of a year ago. Should the drop continue, this metric will warrant further examination, but for the moment, the signal remains strong.
All of the major signs continue to be positive, with strong employment growth a particular bright spot.
The increase in interest rates appears largely the result of speculation about the Federal Reserve’s pending decision to raise rates, but the effect seems to have been moderated by international demand. Whatever the reason, however, rates have not yet risen to a level that threatens U.S. economic growth. Lower oil prices also continue to bolster the economy, which remains well supported across the board.