A curious thing happened on the way to (ever deferred) recovery: America's goods manufacturing sector has been resilient, and in line what one would expect from a recovery. So far so good: the problem as everyone knows, 70% of US GDP is based on "services." And it is here that things get very ugly. As the charts of the day below show, while "goods have been good", it is services that have stunk up the economy in the post-depression era, and are what the Fed has been unable to do anything to stimulate, and by implication have kept US GDP subdued at stall speed levels.
From Bank of America:
The nature of this recovery – with growth concentrated in goods rather than services – leaves the economy particularly vulnerable to an uncertainty shock. Unlike prior recoveries, the service side of the economy has remained disproportionately weak. The service sector shrank as a share of the economy over the past two years. That said, this was only a slight reversal from the multidecade trend away from goods toward services, which has left services as 70% of the economy. The shift last year toward manufacturing and away from services was not due to an exceptional boom in manufacturing. The contribution to GDP growth from manufacturing was akin to prior cycles. The sector gained market share because of an exceptionally slow recovery in services. Unlike the typical post-war recovery, this was not led by a resilient consumer. Households have been in the process of deleveraging in the face of a massive negative wealth shock. The reduction in household formation and home values also significantly reduced spending on housing services.
Goods are good:
But services stink: