While the service economy roars on, the manufacturing economy continues to sputter. The Institute for Supply Management's gauge of the U.S. services sector this week produced a reading solidly in expansionary territory and above expectations, while the manufacturing index hit its weakest level since June 2009 last week.
The gap between the two indexes in December was the largest since November 2015 and the third largest differential in a decade. The manufacturing industry is typically thought of as a leading economic indicator, and a sustained downturn has historically presaged turmoil and even recession. Fortunately, that does not look to be the case right now.
For one thing, manufacturing represents just about 11 percent of the U.S. economy, while the services sector has become the dominant means of employment for Americans. In addition, the U.S. manufacturing industry has been hurt by the strong dollar and weakening global consumer demand, while the service sector is more resistant to those factors.