economy
The comeback of a rate-sensitive America
Manufacturing and construction are now early sources of job growth, helped by an AI investment boom that has so far been unconstrained by still-high borrowing costs.
TL;DR
- Manufacturing and construction sectors are showing renewed momentum after years of being squeezed by high interest rates.
- An AI investment boom, especially in data center construction, is a primary driver of job growth in these sectors.
- Manufacturing has expanded for seven straight months, with its employment gauge entering expansion territory for the first time in nearly three years.
- Manufacturing output is growing at its fastest rate since late 2021, and payrolls have stabilized after previous declines.
- Nonresidential construction employment has reached a record high, largely driven by commercial building and AI infrastructure development.
- Residential construction is an exception, having shed jobs and subtracted from GDP growth due to affordability issues.
- Despite the positive trends, some manufacturers face challenges from weak orders, tariffs, rising input costs, and geopolitical tensions.
- The resurgence in these interest-rate-sensitive sectors suggests monetary policy may be less restrictive than intended.