The US economy has held up pretty well relative to the rest of the world.
In fact, one of the emerging themes in the global economy has been the strength of the US consumer amid a global slowdown.
Add to that a strong dollar — which has made America’s exported goods more expensive to overseas customers — and you begin to see why companies serving Americans are doing much better than companies serving foreign customers. This is illustrated elegantly in the divergence in the ISM manufacturing and services indices, the former being more exposed to overseas activity whereas the latter is more exposed to domestic activity.
BNP Paribas’ Bricklin Dwyer took a more nuanced approached in illustrating this story by separating payroll growth in domestic-facing industries from external-facing industries.
“If we isolate the externally-vulnerable sectors, we see clear signs that the stronger dollar has had a marked impact on hiring trends,” Dwyer wrote in a note to clients. “While our calculations are a bit rough and there is clear overlap, domestic-facing sectors have fared much better.”
Dwyer’s domestic-facing sectors included construction, retail, information technology, financial, professional, education, health care and government services. His external-facing sectors included mining, manufacturing, wholesale, transportation and leisure and hospitality.
“It has been the coincidental slowdown in both domestic- and external-facing sectors that has led to the recent soft patch in employment,” Dwyer added. “We see little reason for this to change significantly this month. In manufacturing, the ISM’s employment index has deteriorated in recent months; while the non-manufacturing ISM survey suggests a more elevated level of hiring.”
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