From the Desk - Economic Commentary
Scott Hofer, Member Strategies Manager - 7/1/2026
U.S. equities opened modestly lower this morning, with the major indices declining after closing the prior session at or near record highs. The Dow Jones Industrial Average, S&P 500, and Nasdaq each registered early-session pullbacks, reflecting profit-taking following a strong prior quarter. Early trading activity indicates a cautious tone as investors digest recent gains and reposition ahead of key economic data releases.
As for economic data releases this morning, the ADP report indicated private-sector employment increased by 98,000 in June, below expectations and down from 122,000 in May, signaling a moderation in hiring momentum. Job gains were heavily concentrated in service sectors, particularly education and health services, which accounted for nearly half of total growth. Goods-producing sectors showed minimal expansion, while other industries experienced declines. Wage growth remained stable, with job-stayer pay increasing 4.4% year-over-year and job-changer wages rising 6.6%. The report indicates a gradual cooling in labor demand, reinforcing expectations for a more balanced, but still resilient, labor market.
The final S&P Global U.S. Manufacturing PMI for June was revised down to 53.9, from a 55.7 flash estimate and 55.1 in May, signaling continued but moderating expansion in the sector. Key underlying components indicated slower growth in output and new orders, though both remained in expansion territory. The report also highlighted accelerating job cuts and declining business optimism, pointing to increased caution among manufacturers. On inflation, input cost pressures remained elevated but eased modestly, with a corresponding softening in output price increases. Overall, the data reflects solid but cooling manufacturing activity, with emerging signs of labor market softening and reduced forward confidence.
The ISM Manufacturing PMI registered 53.3% in June, indicating continued expansion, though at a slightly slower pace than the previous month. Key components showed New Orders at 56.0 and Production at 52.2, both remaining in expansion territory, while Employment at 49.7 signaled contraction. The Prices Index remained elevated at 73.0, reflecting ongoing input cost pressures despite some moderation. Supplier Deliveries at 57.4 indicated continued supply chain tightness, while Inventories at 51.4 returned to expansion. Overall, the report points to resilient manufacturing activity with persistent cost pressures and uneven labor conditions.
U.S. construction spending rose approximately 0.1% month-over-month in May, indicating continued but modest expansion in overall activity. Prior data showed gains driven primarily by residential construction, while nonresidential segments remained comparatively weaker. Private construction activity continues to account for the majority of total spending, with residential investment acting as a key driver. Public construction spending also contributed marginally, supported by infrastructure-related activity. The data suggests a steady but subdued growth trajectory in construction activity amid mixed sector-level performance.
The Mortgage Bankers Association reported mortgage applications were flat week-over-week in the latest release, indicating stable but subdued borrowing activity. Underlying components were mixed, with refinance applications declining 1.0% while purchase applications increased by 1.0%. The average interest rate for conforming fixed-rate loans was slightly lower at 6.57%, a 2 bps decrease.
Subscribe to our daily From the Desk newsletter to get economic commentaries and updated market rates sent directly to your inbox.
Subscribe Here