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Expand chart
Data: Institute for Supply Management; Chart: Axios Visuals

While U.S. manufacturing has fallen into its deepest hole in a decade, the all-important services sector keeps chugging along.

What's happening: The Institute for Supply Management's gauge of the U.S. services sector yesterday produced a reading solidly in expansionary territory and above expectations. That was a far cry from the company's manufacturing index, which last week hit its weakest level since June 2009.

  • The gap between the two indexes in December was the largest since November 2015 and the third largest differential in a decade, ISM data show.

Why it matters: The manufacturing industry is typically thought of as a leading economic indicator, and a sustained downturn in the sector has historically presaged turmoil and even recession.

  • However, that does not look to be the case right now, ISM CEO Tom Derry tells Axios.

What they're saying: "If we were having this conversation in 1965, it would’ve been a much more serious concern," Derry says of the low manufacturing numbers.

  • The U.S. manufacturing industry has been hurt by the strong dollar and global consumer demand that has been weakened significantly by the trade war and tariffs, he adds.

"The services sector is a little more impervious to those factors," Derry says.

  • For example, demand for health care, financial services and higher education is not as dictated by price.
  • And, while the trade war has led to sustained weakness in countries as diverse as Germany, Lebanon and the Czech Republic, the U.S. derives little of its GDP from selling goods overseas.

State of play: Manufacturing represents just about 11% of the U.S. economy, while the services sector has become the dominant means of employment and earnings for the vast majority of Americans.

  • The U.S. has been able to see sustained job gains and wage increases even as sectors like manufacturing, mining, transportation and trade have suffered.

Between the lines: The Fed's three rate cuts and bond buying in 2019 also have played a role in allowing the services sector to continue its strong performance, largely unabated by manufacturing's slowdown, Julia Coronado, president of MacroPolicy Perspectives, tells me.

  • "That kept financial conditions pretty buoyant, that keeps confidence high and is a buffer for consumers ... so you keep that virtuous cycle going between hiring and consumer spending that centers on the service industry."
  • "Certain industries in certain regions are feeling the pain of the manufacturing slowdown but it’s not dominating the economy overall."

Go deeper:

Go deeper

Updated 53 mins ago - Economy & Business

Hybrid work now dominates the knowledge economy

llustration: Eniola Odetunde/Axios

For the first time since the start of the pandemic, most knowledge workers are in hybrid work arrangements, partly remote and partly in-office, a new survey finds.

By the numbers: 58% said they now work this way, in a survey of around 10,000 knowledge workers from the U.S., Europe, Australia and Japan, conducted last November by Future Forum, a research group backed by Slack.

Rents hit all-time high

Data: Zumper; Chart: Axios Visuals

The national median price of a one-bedroom rental apartment in January was up 12% year-over-year, to $1,374 — an all-time high, per Zumper, an online apartment rental site.

Why it matters: Inflation is taking a bigger bite out of people's paychecks these days not only in food and gasoline, but also in housing costs.

A pandemic victim: Ethical supply chains

Illustration: Aïda Amer/Axios

Over the last decade, global companies have put in place elaborate policies to ensure their suppliers protect worker safety and human rights. They're struggling to comply with those policies in the pandemic.

Driving the news: COVID-era disruptions have caused a spike in noncompliance with health and safety rules, according to new data from Qima, which audits supply chains.