Dive Brief:

• The strong American dollar is having the drag on the American economy that many economists have warned about.

• The dollar’s pull has affected employment, exports, and factory activity aboard, economists say.

• Meanwhile, retailers sourcing goods from Asia are finding materials more expensive because factories there use the American dollar. By the same token, retailers that source their goods or contract with factories in Eastern Europe could see a benefit. 

Dive Insight:

The strong dollar is increasingly appearing in retailers’ earning reports as a factor pulling down their bottom lines, and there’s no end in sight right now. A strong dollar means that, in particular, U.S. retailers with a large presence abroad or that cater to foreign tourists here will take a hit as their goods become more expensive.

The strong dollar can also keep tourists away from U.S. shores — and U.S. retailers. It doesn’t help that Europeans are also dealing with a struggling economy that is hurting their employment picture and the value of the euro. 

But overall, the muscle-bound dollar is a bit too much for the economy as a whole, dragging down growth.

“It takes a while for the dollar to work its way through the economy, but it’s weighing on manufacturing,” Michael Gapen, Barclays chief U.S. economist, told the New York Times. “Some Fed policy makers are definitely looking at this, and they know that trade will be a big drag on growth. It’s very clear that the dollar’s strength is showing up in the numbers.”

That could mean that the Federal Reserve may hold off on raising interest rates till March; the Fed was widely seen as likely to raise rates at the end of this year or first thing in the new year.

All this adds to the not-quite-there feeling that consumers have about the American recovery. As with the wage gap, consumers have a reason to hesitate as employment growth remains muted and companies report weaker than expected earnings.