“Stunning fall” of the US services economy
Losing millions of manufacturing jobs overseas is no problem because we’re a really cool services economy now!! Right!?!? Right!?!?
Bloomberg: U.S. service industries unexpectedly shrank in January at the fastest pace since the last recession as the housing slump deepened and consumer spending cooled.
“This is a stunning fall,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. “If accurate, it’s dire news on the economy.”
The Institute for Supply Management’s non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, from 54.4 the prior month, the Tempe, Arizona-based ISM said. A reading of 50 is the dividing line between growth and contraction.
The worst housing slump in a quarter-century is spreading throughout the economy, hurting businesses such as builders, retailers, wholesalers and mortgage lenders. The report adds to concern Americans are spending less as job losses mount, raising the risk the economy may tip into a recession, economists said.
Thanks for posting this. It is important the American workers realize that we can’t compete in any area of the economy. As long as anything that can be done overseas contains hidden taxes and compliance costs, they will leave.
They just announce on a financial news station that another “emergency rate cut” by the Federal Reserve is being rumored as possible. Today’s market drop has more and more saying we are already in a recession without even one quarter of negative GDP. However, if inflation were reported as it used to be, we have been in a recession for a long time.
Real wages have been dropping, not rising because of under reporting of inflation for years.
The DOW priced in commodities, at the peak of 14,000 was still below what it was in 2000.
If you sold a hundred barrels of oil, bushels of grain, ounces of gold and bought the DOW and then sold it at the peak, you couldn’t have bought back what you sold to buy it.
The whole “Bush economy” has been nothing but smoke and mirrors but, certainly better than it would have been had nothing been done.
Our entire economy, standard of living and global power is in decline and has been for a long time, even before Bush took office. But, under him, we are seeing the acceleration of that decline, not because of him, so much, but because of trends that have been in place for decades.
The GAO has been unable to give an accurate report on our fiscal condition for over 10 years, long before Bush took office, because of the mess our government and economy and spending and tax revenues are in.
For three years they have warned we are facing the loss of our standard of living. Without manufacturing AND the service economy, that prediction could be coming true.
This is why you saw a panic in the Federal Reserve and Congress before we even entered a recession. It may be why some in the GOP have decided to retire. Who wants to be in Congress if there is an economic collapse.
If they can’t create a new bubble with more rate cuts and deficit spending, then we are in serious trouble.
Manufacturing activity across the US surprised analysts and re-entered expansion territory in January, after having dipped into contraction in December, according to a key survey out today.
http://tinyurl.com/yukgtb
True, but in what? Isn’t it in the things we “export?” Also, what sectors are the increases in? Do you have any sources for what sectors it is in?
With the falling dollar, we have become more competitive in some areas.
There is some real mixed news coming from Business.
quote:
Cost Concerns
Seventy-four percent of CFOs surveyed consider materials and equipment to be their number one cost concern. This was down from 84 percent last year, but still holds the top spot. This was followed closely by the cost of healthcare at 71 percent and energy prices at 65 percent (Exhibit #5 — Financial Concerns).
Slower Spending
The outlook for capital expenditures has weakened somewhat with only 32 percent of CFOs indicating that their capital expenditures for next year will be higher compared to 38 percent last year. Twenty-seven percent of CFOs expect to spend less or refrain from making capital expenditures altogether in 2008 compared to 21 percent last year. This correlates with the uncertainty about the direction of the U.S. economy.
Among those predicting higher than average levels of capital expenditures over the next 12 months are businesses expecting expansion in the manufacturing sector (41%), and companies with revenues between $200 million and $500 million, those expecting sales to foreign markets to increase and those expecting labor costs to decrease, all at 40 percent.
Fifty-eight percent of CFOs expect to borrow money for a variety of purposes, including capital expenditures (34%), working capital (29%), U.S. expansion (20%) and acquisitions (18%) (Exhibit #6 — Financing Purpose). They also expect to use a variety of financing sources, with internal funding (59%), cash flow financing (42%), asset-based lending (38%) and leasing (33%) mentioned most frequently. Credit is still plentiful. Thirty-five percent say the availability of credit from their lender has increased during the past 12 months and 50 percent say it has remained the same.
Source
There is a real tug of war going on out there. The consumer is key. I don’t think the real downturn in consumer spending has hit yet. They are living on credit cards now but, that scene is changing with Credit Card companies now saying they are going to be tightening up on their card holders.
Jan
It’s good news either way correct? We’re either exporting or competing with imports.
Yes, for those businesses but, I believe they will not be enough to save the economy. Too many workers will still be sidelined.
We need to save, control debt, become energy independent and have a sound currency.
What is going on now, in those industries is like a bandaid on a huge open wound.
Remember that for decades the Asian nations were growing exports with their low wage manufacturing and yet, you sure wouldn’t have wanted to live in those nations.
That will be the case here. Low wage workers that are miserable don’t make for a nice country to live in. If we have to compete by lowering our wages and value of our currency to their level, we have lost the economic war.
They will continue to raise their standard of living while ours drops. Why?
Because they save and invest and loan and strive for higher and higher education levels each decade. They are building new power plants, water systems, pipe lines, rail lines while ours fall into disrepair.
A rising manufacturing group using lower wage (in equivalent buying power per dollar) is not a solution. It won’t raise tax revenues enough to compensate for the extra spending needed for social spending.
It would be good news if it accompanied tax reform, compliance reform, energy independence, a sound currency, declining debt, etc.
There’s nothing stunning about the fall of the service economy.
The only really lucrative “service” in the service economy is financial services. We’ve all seen how well the financial services sector has held up to it’s self-inflicted crisis…