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US Economy: A Change Of Tone

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What's going on?

“Services” like healthcare, insurance and entertainment make up about two-thirds of the US economy – and a report on Thursday showed that this important part of the economy is holding up pretty well.

What does this mean?

Given that manufacturing (e.g. making stuff in factories) has been weakening for almost 6-months, there were concerns that service activity could be in danger too. As it turned out, services were only marginally weaker – and it appears they’re still growing at a decent clip.

There was some bad news: the data suggested that the number of people employed in the sector might be declining very moderately, but that could be just a short term blip (we’ll know more on Friday, when some data regarding overall jobs in America is released).

Why should I care?

For markets:The narrative seems to have totally changed in the past 3 weeks. It wasn’t long ago that market chatter was filled with fears that America’s economy might be starting to shrink. Increasingly, people are believing that while growth slowed, the economy isn’t doing too badly – and will likely pick up this quarter. That’s a big part of why stocks have rebounded so sharply: US stocks are up almost 10% since their low 3 weeks ago.

For you personally: Keep an eye on the jobs data. The one weakness in the “services” report is the one that could be most impactful to you: employment. If you’re like the majority of our readers, you work in a “service” industry. It’s not like alarm bells are ringing, but the data did point to a decline – so let’s hope it’s temporary and the job market will stay reasonably strong.

Originally posted as part of the Finimize daily email.

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