Economies worldwide are in recession and it’s getting worse. The momentum on the downside is too strong and the losses too pervasive to expect bailouts or interest-rate cuts to have more than a temporary effect. At best, government can slow down the rate of decline or perhaps delay a crash, but at great future cost.
In the US, what started out as a housing problem in a few states has now become a full-fledged recession, with a majority of states (30) now in or dangerously close (19) to recession. The single exception is Alaska, according to Moody’s Economy.com.
Just in case you thought there might be a way out by moving to a state where prospects are better, it won’t work this time. Mark Zandi, chief economist at Economy.com told ABC News recently. "One of the unique features of this downturn is how broad-based it is regionally."
Jobs
According to ADP’s National Employment Report released November 5, “Nonfarm private employment decreased by 157,000 jobs from September to October 2008, on a seasonally adjusted basis.” Keep in mind that the economy must create 150,000 jobs per month to absorb new entrants in the workforce. Friday’s official figures are expected to show unemployment at 6.1%.
October’s employment loss was driven by the goods-producing sector, which lost 126,000 jobs, declining for the 23rd consecutive month. The manufacturing sector was down another 85,000 jobs. These losses were compounded by a loss of service-related jobs, which fell by 31,000, the first loss in the service-providing sector since November 2002, according to ADP.
The estimated change in employment from August to September 2008 was revised down to a decrease of 26,000 from a decrease of 8,000. Not only is that quite the revision, but it’s an indication of what to expect when October’s figures are revised.
Service Sector
The Institute for Supply Management, a trade group of purchasing executives, said today its service-sector index suffered a sharper-than-expected drop to 44.4 in October from 50.2 in September. Consensus was 47.5; a reading below 50 signals contraction.
Auto Industry
GM, Chrysler and Ford—near bankruptcy due to a combination of poor management, slowing global growth and problems in credit markets—are looking for a government bailout.
However, problems aren’t confined to the US. Toyota sharply cut its profit forecast today, warning the global auto industry faces an "unprecedented" crisis. Other auto companies that have issued recent profit warnings are BMW, Nissan and Honda.
Construction
In October, construction employment dropped 45,000 jobs. This was its 23rd consecutive monthly decline, and brings the total loss of construction jobs to 455,000, off the peak in August 2006.
Consumer Sentiment
Rising unemployment, increases on food and fuel prices and falling property values have brought an end to the longest expansion in spending on record. In October, the Index of Consumer Sentiment was 57.6, a record 12.7 points below September’s 70.3 and 23.3 points below last October’s 80.9.
This month’s result was the largest monthly decline in consumer confidence in the history of the surveys. By mid-2008, consumer confidence had already declined more than in any prior recession and the steep October loss indicates that accelerated cutbacks in spending can be expected during the months ahead, according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers.
Start formulating Plan B, if you haven’t already.
mg
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