If you’ve watched the network and cable news at all over the past few months, you might be forgiven for thinking that “the sky is falling” when it comes to the US economy. News anchors, journalists and pundits have been talking “recession” nearly nonstop recently, but surprisingly, many indicators suggest that the US economy is more resilient than we’ve been led to believe by the 24 hour news networks.
Consider the recent indicators from the US service sector, which show that the sector expanded in April from 49.6% to 52%, beating the predictions of both pundits and economists. Overall, the US service sector represents about 70% of the American economy, so it is obviously a very good indicator of the overall state of the US economy.
In addition, employment and manufacturing indexes for the first quarter of 2008 also showed better than expected numbers — further evidence that the US economy could rebound quicker than predicted by many economists.
While the US economy may (or may not) be in a recession, the new service sector reports and other indicators suggest that things may not be as dire as the news media would have you believe. Even the US dollar, which has been at all-time lows against many currencies over the past six months, has shown slight gains in the past few weeks.
Also, on Friday the US jobs report was released for the first sector of 2008. The report showed that US hiring was surprisingly strong, considering the relative economic slowdown over the past two quarters. In fact, the recent employment report posted the highest numbers since December of 2007, and suggests that business services employment is also more robust than most pundits had predicted.
The jobs report lends significant credibility to the US service sector report, indicating that even though the US economy is in a bit of a slump at the moment, things are definitely not spiraling out of control, as has been reported by some cable news networks.
On the downside, the business activity index fell 1.3 points in the first quarter of 2008, suggesting that new businesses, especially, are still in a slump. Overall, the economic indicators are somewhat mixed, but there are enough positive trends to suggest that the economy could rebound by the fourth quarter of 2008, or possibly even sooner.
The great moral of all this is this: the US economy may be in a slump for the time being — but it is certainly not in a recessionary tailspin.
The US dollar is being devalued but the US workforce is as productive as ever — the fault lies directly in the hands of the Fed and by extension, in the hands of the US people who allow for the fiat money to be handled without proper oversight.
Comment by Claude Gelinas — July 4, 2008 @ 8:43 am