Every month, the economy offers signals that may help business owners make more informed decisions. From hiring trends and interest rates to supply chain shifts and investor sentiment, understanding what’s happening beneath the headlines could offer a strategic advantage. In this report, we break down key market indicators and explain how they may relate to your business goals and planning for the months ahead.
U.S. Job Growth Slows, Labor Market Cools
Key Market Indicator
According to the Bureau of Labor Statistics, nonfarm payrolls increased by approximately 139,000 jobs in May, below both the six-month average (157,000) and consensus expectations. The unemployment rate held steady at 4.2%.
Why It Matters
Hiring has not stopped, but the pace has cooled. This could ease some labor market pressure for employers seeking talent. On the other hand, it may also reflect a broader slowdown in demand. Business owners may want to review hiring plans and assess the sustainability of workforce growth in the current environment.
Treasury Yield Curve Shows Early Signs of Normalization
Key Market Indicator
Based on U.S. Treasury data, the 10-year minus 2-year yield spread is now at +46 basis points. This reflects short-term rates falling more than long-term ones. Meanwhile, bond market volatility, as measured by the ICE BofA MOVE Index, has declined from a high of 140 in April to 93 — roughly in line with its long-term average.
Why It Matters
A more stable interest rate environment may create a window of opportunity for businesses exploring refinancing or new lending. However, since rate trends can shift quickly, any decisions should be based on your broader strategic plan.
Leading Economic Index Still Negative, But Improving
Key Market Indicator
The Conference Board’s Leading Economic Index (LEI) declined 4.0% year-over-year in April, compared to a 3.5% decline the prior month. While still contracting, this measure has been trending more positively since bottoming out in April 2023.
Why It Matters
The LEI is not a forecast but may offer insight into future business conditions. For business owners, this may be a signal to remain cautious but optimistic. Stay agile and operationally efficient while monitoring for signs of growth.
Services Sector Contracts for the First Time in 10 Months
Key Market Indicator
The Institute for Supply Management (ISM) Services PMI registered 49.9 in May, falling just below the neutral level of 50. Ten industries reported growth, while eight reported contraction.
Why It Matters
Service sector businesses may begin seeing slightly softer demand. If your company provides services to consumers or other businesses, it may be worthwhile to focus on client retention and operational adaptability during this phase.
Manufacturing Sector Contracts Again
Key Market Indicator
The ISM Manufacturing PMI came in at 48.5 for May, signaling contraction for the third consecutive month. Seven industries reported growth and seven reported contraction.
Why It Matters
This could reflect reduced demand or inventory adjustments in certain sectors. Manufacturers and those reliant on industrial suppliers may want to watch for disruptions or shifts in production timelines.
Pending Home Sales Decline, Mortgage Rates Stay High
Key Market Indicator
According to the National Association of Realtors, pending home sales declined 3.5% year-over-year in April. The 30-year fixed mortgage rate averaged 6.9%.
Why It Matters
Housing activity remains subdued. If your business is tied to real estate, lending, or home-related goods and services, consumer hesitation due to high borrowing costs could influence your pipeline or demand forecasting.
Mixed Investor Sentiment
Key Market Indicator
The AAII Sentiment Survey shows 32.7% of investors are bullish and 41.4% are bearish, for a bearish spread of -8.7%. Meanwhile, the CNN Fear and Greed Index remains at 62, categorized as “greed.”
Why It Matters
Investor sentiment does not always match market direction, but it may shape capital flows and business confidence. For privately held companies or those seeking external capital, staying aware of investor psychology may provide useful context for upcoming conversations or fundraising strategies.
Actionable Takeaways
- Review hiring plans in light of a potentially softening labor market. Focus on quality over quantity in hiring by identifying roles that drive the most value.
- Explore financing or refinancing options while interest rate volatility is reduced.
- Focus on operational efficiency as leading indicators remain in negative territory.
- Evaluate service offerings and client retention strategies, particularly in competitive sectors.
5. Monitor consumer behavior and regional real estate trends, especially if your business is indirectly tied to housing activity.
