Oct 28, 2015

Economists at Goldman Sachs believe that while most of the U.S economy is expanding (i.e. the service side), manufacturing may be contracting.

A new report authored by David Mericle says the weakness is not just energy-related and is affecting industries with foreign buyers the most. He writes:

The large gap between the manufacturing and non-manufacturing sectors that opened at the beginning of this year has widened in recent months, raising concerns that the more foreign-exposed manufacturing sector could become a channel through which weaker global growth affects the US economy.

On the bright side, the weakness in manufacturing doesn’t seem to be spreading to the rest of the economy yet. Most importantly, employment is not broadly affected:

We find that while the loss of one job in the manufacturing sector has historically been associated with the loss of 1.5-2 jobs elsewhere, data from the last year do not show evidence of negative spillover effects.

Mericle concludes with a (sort of) upbeat assessment:

Overall, our conclusion is cautiously optimistic: while the slowdown in manufacturing is genuine and history suggests it will likely lead to some negative spillovers, the recent data do not show evidence of such spillovers yet.

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