I wanted to draw your attention to a lengthy post at Barry Ritholtz’z The Big Picture. The post is a re-printing with permission of a condensation of Gary Shilling’s monthly newsletter for September. Read it and you’ll be getting much of what Dr. Shilling’s subscribers are paying $20+ for. The upshot of the report is that Dr. Shilling believes we’re in for a lengthy period of slow or no growth (something I’ve been saying around here for some time) or even a double dip or second recession. Here’s a meaty section to chew on:
Despite the huge employment losses since the end of 2007, many of those jobs are unlikely to return. Of the 7.7 million net nonfarm jobs eliminated between December 2007 and July of this year, 86% were in construction, manufacturing, wholesale and retail trade, finance and leisure and hospitality. These six sectors accounted for 44.5% of nonfarm payrolls in July, only about half as much as their losses. Furthermore, job losses in those industries spawned employment losses in service and other sectors that depend on them. Home building, for example, spurs employment in the production of appliances, furniture, home furnishings and homeowner insurance and provides revenues that support state and local employment.
Construction, manufacturing, and finance are more likely to shed additional jobs than they are to start hiring any time soon. The sectors that are adding employees, i.e. government, healthcare, and education, are totally or heavily dependent on tax dollars (or borrowing). That’s not the stuff of which recovery is made.
The post is full of interesting charts and graphs. I found the chart of personal consumption as a percent of personal income quite interesting. It tracks demographic trends quite closely.
This was interesting.
“Sure, large banks report to the Fed that they are easing lending standards for small business, but after the intervening financial crisis, many fewer potential borrowers are deemed creditworthy than in the loose lending days. Furthermore, the small business trade group, the National Federation of Independent Business, reports that 91% of small business owners have had their credit needs met or business is so slow that they don’t want to borrow. The Fed is pushing on the proverbial string.”
Why are we so fixated on small business?
Steve