TD Securities strategists expect the ISM Services index to decline in June after May’s increase, pointing to broad-based deceleration in US activity and new orders while employment remains in contraction. They report weaker June payrolls, with the unemployment rate declining due to lower participation and leisure and hospitality jobs being negatively impacted by seasonal factors. Recent long dollar strategy and lower pricing for Federal Reserve increases in 2026 have been called into question by weaker data.
Cooling services and softening jobs
"We anticipate that the ISM services index will decrease to 54.0 in June (cons: 54.2), partially reversing the ~1 point increase from May. While employment most certainly remained in contraction territory, we expect a widespread slowing, with activity and new orders accounting for the majority of the cooling."
"costs paid are projected to fall as well, as the index went continuously higher along the March-May spike in energy costs."
"Payrolls softer than predicted, led by weak leisure & hospitality positions driven down by seasonal adjustments."
"On the way back to breakeven, job gains materialize.Because fewer people participated, the UE rate dropped to 4.2%.
"The Fed will continue to focus on inflation if the labor market remains steady. Weaker data challenges the recent increase in long USD positioning. Pricing for 2026 rises fell, driving yields down."
Cooling services and softening jobs
"We anticipate that the ISM services index will decrease to 54.0 in June (cons: 54.2), partially reversing the ~1 point increase from May. While employment most certainly remained in contraction territory, we expect a widespread slowing, with activity and new orders accounting for the majority of the cooling."
"costs paid are projected to fall as well, as the index went continuously higher along the March-May spike in energy costs."
"Payrolls softer than predicted, led by weak leisure & hospitality positions driven down by seasonal adjustments."
"On the way back to breakeven, job gains materialize.Because fewer people participated, the UE rate dropped to 4.2%.
"The Fed will continue to focus on inflation if the labor market remains steady. Weaker data challenges the recent increase in long USD positioning. Pricing for 2026 rises fell, driving yields down."
