The employment release provided some interesting insights into how manufacturing has fared, in the wake of the appreciation of the dollar (and the slowdown in the world economy).

In particular, manufacturing employment growth registered at the high end of the range experienced over the past year, as noted by Furman/CEA.

Figure 1: Log industrial production in manufacturing (blue), employment (red) and aggregate hours (green), all normalized to 2014M07=0. Source: FRB and BLS via FRED, and author’s calculations.

Note that while employment is above the most recent peak, aggregate hours is not. Furthermore, the dollar has appreciated on a broad basis by 17.7% (log terms) since 2014M07, and the lagged effects are yet to fully appear.

Figure 2: Log trade weighted value of USD, broad basket of currencies, 1973M03=0. Source. FRB, author’s calculations.

Hence, the question in my mind is how long this seeming resilience (keeping in mind all recent data entries will be revised) will persist. Maybe a Plaza Accord II, if effective, wouldn’t be such a bad idea. Absent that, further deferral of monetary tightening makes (a lot of) sense.