The sectors of the economy that make stuff — manufacturing and construction — are having somewhat of a moment. Only just not a fantastic one.

The Institute for Supply Management’s Purchasing Manager’s Index for manufacturing contracted in May. It’s been in the doldrums for the last year and a half, contracting in 18 of the last 19 months. And the government reports construction spending fell for a second month in April, while factory orders were up less than 1% after being revised down for March. 

Blame the slowdown on high interest rates and weak demand for manufactured goods, according to Kathy Bostjancic, chief economist at Nationwide.

“Manufacturing activity really has been subpar, and what has been driving the economy is service consumption, not goods consumption. So that’s why manufacturing is soft,” she said.

High interest rates make everything from building a house to buying new business equipment more expensive. The slump hasn’t extended to jobs, though. 

“Manufacturers have been more reluctant to lay off workers because they’re concerned that when things pick up down the line, it’ll be harder to staff up again,” said economist Bill Adams at Comerica Bank.  “These are physically demanding jobs, they have inflexible schedules, overtime, and those jobs are harder to staff than a job where people can work remote or hybrid and sit at a desk.”

Manufacturing employment has been stable over the past few months; in construction, it’s been rising.