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Consistent with your longstanding "produce or perish" theme...
US Service Sector in Recession
January 2008 Non-Manufacturing ISM Report On Business
The service economy is most of our economy today. It appears to have just collapsed.
The hyperbole is not especially helpful. Yes, the service sector appears to be in contraction, but to call this "collapse" is rather suspect.
It's a 23% decline, from 54.4 to 41.9. If it had gone from 54.4 to 49.9, it would be appropriate to say "Yes, the service sector appears to be in contraction..."
We're talking about what Bloomberg has estimated is 90% of the U.S. economy.
"The survey results were downright disastrous," said Stephen Stanley, chief US economist at RBS Greenwich Capital.
I hate it when people nag others to express themselves only in optimistic terms. I agree there's reason for hope, but if someone doesn't agree with a pessimist's view, why not simply put up the alternate view and explain the reasons for it, rather than seeking to enforce a happy-talk code of conduct?
From the link, I can't determine what a decline from 54.4% to 41.9% means. The original gives it as a percentage, but of what? It doesn't say. So on its face it's just yet another of a bazillion trumped-up proprietary magic numbers that attract a bazillion press releases that ultimately clog up the "internets" with a bazillion pleas for Congresscritters to hose the taxpayer by voting up subsidies for their special-interest pets. I can't tell how much it amplifies real-world changes. I can't tell what real-world changes those might be. I can't even find a long-term time series by which to guess how volatile it is (maybe I didn't look hard enough or it's squirreled away behind a paywall as if it were a CERA report; those guys gotta make money somehow.)
Now, if we had suddenly lost 23% of all service jobs, then that would be so obvious that none of the ever-popular conspiracy methodologies rehashed for the umpteenth time on today's Drumbeat could conceivably hide it. For one thing, I'd have to take a long detour to get around the line at the local unemployment office. So did we lose 23% of anything that matters? Did we lose 23% of anything at all? What would the world look like at a reading of 0%? 100%? Dunno. It might as well be a random number. This is not a matter of "a happy-talk code of conduct", there's plenty of unhappy talk here most days. It's simply a matter an apparently empty article.
If you can state or point to better information on what it might mean, please do. Meanwhile...???
The ISM is a survey of manufacturing executives on their 'feelings' about the manufacturing sector. Since their 'feelings' have more validity than yours or mine regarding the manufacturing sector, the market occasionally takes notice of this number. (It used to not move market at all - the economic numbers that move the market change over time - this is another one of those '1,000 post card' survey type numbers)
The Institute for Supply Management is not a johnny-come-lately to the data scene. If you had read the associated links you would have discovered that the scale works like this - 50.0 is a flat economy. Anything over 50.0 is a growing economy. Anything under 50.0 is a contracting economy. The ISM has kept detailed records using this format for decades and is thus well qualified to determine what constitutes "growth" in the service economy and what constitutes "contraction".
Further, the ISM's report was cited as one of the main drivers in yesterday's 370 point drop of the DOW and the 1339 point (5.40%) drop in the Chinese stock market last night. Apparently some people give the report more weight than you do.
Furthermore, rather than ranting, you could have read the ISM Report FAQ which would have probably answered many of your questions. ISM (formerly PMI) reports go clear back to 1948, if you care to dig in the archives.
This is a pretty serious contraction, especially if next month's report continues the trend.
Or, you can continue to pretend that all's well with the economy. If that's what you wish to do, be my guest.
Hello, GZ, thanks for the link. Now that I know what it is, I still haven't found a link to it on their cluttered home page, although I found several other FAQs hidden under the mouse-over covers. Maybe it's there somewhere. Nor have I found an identifiable link to it on their "site map", nor in the two originally linked pages. Nor do I see any links to "archives" in any of those places. (Would I need a paid-up membership?)
Oh, and the original ISM page delves into the subject matter of the various indices, but does not state the methodology used to produce the individual numbers. Now that I have this particular FAQ, I see it's basically all a touchy-feelie thing. It doesn't really mean "50 is a flat economy", only that the number of respondents saying "better" equalled the number saying "worse", i.e. their net response-to-survey-quality guess is "flat". That could well slosh all over the map with very small changes in the economy, as it doesn't seem to say that the result is weighted according to the fraction of the economy a respondent manages supplies for, nor even according to the severity of the change said respondent sees through his or her own proprietary window.
This all seems fairly consistent with Nate's remark, "...this is another one of those '1,000 post card' survey type numbers", so I'm inclined to go with that. It's probably better than asking 1,000 bloggers, but it's probably not all that great.
Which BTW has no connection to what I might think the economy might do. Among other things, I think there are more than enough (figurative) helicopters available to guarantee stagflation. And I think that will reinforce the powerful lesson Baby Boomers learned in the 1970s: saving is a chump's game because the government will confiscate much of what you save. And I think it will teach that lesson well to two more generations. And I think that will be very, very bad for raising the enormous investment apparently needed to secure even very modest supplies of non fossil-fuel energy. Then again, I could be wrong.
PaulS
'I think there are more than enough (figurative) helicopters available to guarantee stagflation. And I think that will reinforce the powerful lesson Baby Boomers learned in the 1970s: saving is a chump's game because the government will confiscate much of what you save. And I think it will teach that lesson well to two more generations.'
we don't save due to compulsive spending which is psychological. & yes it would be confiscated but we've been trained too well & as nate says spending gooses our biochemicals.
i agree the helicopters may work a time or 2[mostly a psychological trick as u seem to point out] but if the upcoming decline begins in a few years or less the psychology will change due to reality & the ponsi schema is up. & it won't take generations.
my point is lots of the economy at this point seems psychological. maybe u are right about the research quality of the the study but it is the right arena.
I think appears is the operative word. On NPR yesterday it was explained that the index is psychological in that it measures how much new supply, i.e. paper, pens, pencils, ladders, toilets, etc., purchasing managers will buy to meet expected upcoming orders.
Apparently because purchasers can quickly change their mind it doesn't mean a whole lot but in print it has a solid psychological hit.
We'll see.
Absolutely true, Ammond. But if those psychological aspects turn into real actions (delayed or canceled orders, etc.) then the hit becomes real. Part of what the index measures is what business people are planning to do (purchases, hirings/layoffs) and what they believe they are seeing happen with their businesses.
I found this helpful; IMS and employment:
http://krugman.blogs.nytimes.com/2008/02/05/how-bad-is-that-ism-report/