Weekly economic review & outlook
Service sector starving for workers
July 12, 2021
You Need to Know
Week in review
Service sector growth hit by lack of labor
The ISM services index fell in June but still indicated solid expansion conditions. Small businesses continue to have difficulty finding workers to meet rising consumer demand.
Long-term interest rates pull back further in early July
The 10-year Treasury note yield briefly dropped below 1.30 percent as recent Fed purchases of Treasury notes have about equaled new issuance, with lower inflation and growth expectations having an impact, too.
Slower inflation projected for June
The consumer price index (CPI) likely rose by 0.4 percent for June – a smaller increase than over the previous three months but still above the long-term trend.
Retail sales likely up a tad, but held back by a sharp drop in light vehicle sales
The already reported supply-chain caused pullback in light vehicle sales is expected to hold down overall retail sales for June, with a rise of 0.1 percent.
The ISM services index was weaker than expected for June, falling to 60.1 (readings above 50 indicate expansion). While this is still a very strong reading and points to further solid sector growth, the survey data continued to highlight the challenges for service industries from the lack of available workers. New orders remained elevated, but overall business activity dropped despite the widespread reopening of in-person activities and the employment component fell into contraction for the first time since December.