Service Sector Continues To Grow

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The service sector of the U.S. economy accounts for about 70% of all jobs, while manufacturing payrolls account for about 9% and government about 15%. So the health of the service sector tells us a lot about the health of the overall economy.

The latest news on the health of the service sector shows it is doing just fine, which is a good reason to think that the bond market is overly concerned about downside economic risks.

The Business Activity subindex of the IMS service sector report for June running is actually a bit higher than its 6-yr average.

The Prices Paid subindex shows that deflationary pressures associated mainly with declining oil prices have substantially dissipated.

The Employment subindex is still positive, but not by much. This reflects a lack of business confidence in the future, and that in turn dovetails with the lack of business investment in general and the fact that this recovery has been the weakest on record.

The overall Service Sector report for June was also a bit higher than its 6-yr average. Conditions are not quite as healthy in the Eurozone, but their index is still comfortably in positive territory.