Downside Risks

By Isaac Cohen*

On the eve of another meeting of the central bank in Washington and of the announcement of employment figures for October, several indicators are turning downwards.

In the United States, the economy remains solid, growing close to 2 percent, with low inflation and 3.5 percent unemployment, the lowest figure in half a century. However, these figures do not reveal that there are sectors where economic activity is contracting. In September, manufacturing declined for the third consecutive month by 0.8 percent, from last year. More illustrative of the slowdown is the September decrease of 1.1 percent in durable goods orders, from August, which indicates weakness in business investment. Also, between January and August this year, 55,000 new jobs were created in manufacturing, down from 162,000 created during the same months of last year. This may be the result of a loss of confidence among investors, because of the uncertainty caused by the protectionist trade policy emanating from the White House.

True, the decrease in durable goods orders also resulted from difficulties in the transportation equipment sector, such as the strike at General Motors and the grounding of Boeing’s 737 MAX aircraft. It remains to be seen if the slowdown in manufacturing can hurt the overall economic performance, because the sector is not as significant as it used to, it contributes over 10 percent to economic activity and hires 8.5 percent of the workforce.

Two signals should be watched. First, if the Federal Reserve lowers interest rates again and second, if the job figures for October are weak.

*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.

About Ramón Jiménez

Ramón Jiménez, Managing Editor de MetroLatinoUSA.Com (MLN). Graduado de la Escuela de Periodismo de la Universidad del Distrito de Columbia (UDC). Email: [email protected]

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