But service industries are holding up and consumer spending, which makes up almost 70 percent of the American economy, has come in strong. The August jobs report showed that employers added 130,000 workers last month, and average hourly earnings climbed 3.2 percent over the year. While employment growth has slowed, it has remained strong enough to keep the unemployment rate near a half-century low.
The question is what will happen next. Geopolitical risks eased somewhat this week, as the risk of an imminent no-deal Brexit waned and China and the United States agreed to resume talks, but trade tensions are likely to persist. They seem to be slowing business investment and holding back growth, which could threaten future growth. A key bond market recession indicator is flashing red.
Central banks around the world are cutting interest rates and trying to encourage borrowing as signs that the global economy is slowing proliferate.
The People’s Bank of China cut the amount of money that banks are required to keep in reserve Friday, a step that will increase the amount of money available for lending and lead to lower interest rates.
The European Central Bank is expected to cut one of its main interest rates when its Governing Council meets on Thursday. The bank, which sets monetary policy for 19 countries in the eurozone, may even resume buying government and corporate bonds as part of the stimulus program known as quantitative easing.
Germany, which has the eurozone’s largest economy, is on the brink of recession, dragging down growth in the rest of the bloc.
In the United States, inflation has already run shy of the Fed’s target of 2 percent for most of the expansion, and a weaker economy could prevent it from hitting that mark, undermining the central bank’s credibility and leaving it with less room to cut interest rates — which incorporate price gains — going forward. Prices climbed by just 1.4 percent in July, based on data from the Commerce Department.
“Low inflation is indeed the problem of this era,” Mr. Williams, the head of the New York Fed, said this week. “The current outlook of moderate growth, low unemployment, but stubbornly low inflation is a reflection of the broader economic picture.”