I don’t know about you but something that nettles me is when a news article reports on a press release or study and draws a conclusion that’s not really supported all that well by the press release or study itself. So, for example, this article headlined “Service Industries Grow For First Time in a Year”:
Oct. 5 (Bloomberg) — U.S. service industries expanded in September for the first time in a year as the emerging recovery spread from housing and factories to the broader economy.
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 50.9, higher than forecast, from 48.4 in August, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction.
Pretty encouraging, no? However, when I looked at the actual press release (which I had to prowl around a bit to locate—why don’t journalists link to their sources?), it painted a somewhat different picture:
The five industries reporting growth in September based on the NMI composite index — listed in order — are: Utilities; Health Care & Social Assistance; Retail Trade; Construction; and Wholesale Trade. The 13 industries reporting contraction in September — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Mining; Public Administration; Other Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Information; Management of Companies & Support Services; Finance & Insurance; Educational Services; and Transportation & Warehousing.
I’ve put the industries exhibiting growth in black bold and the industries reporting contraction in red bold.
“Utilities” is a complicated sector, mostly composed of energy and water companies. Businesses in this sector tend to be very highly regulated and intimately connected to federal, state, and local governments. “Health Care & Social Assistance” pretty much speaks for itself: 50% or more of the revenue in the healthcare sector comes from tax dollars and that’s even higher among social assistance businesses. I honestly don’t think we can base a robust recovery on government handmaiden industries. I don’t have access to the underlying numbers but those two sectors must account for most of the expansion since whatever growth there is in retail and construction must be pretty darned phlegmatic judging by the other numbers I’ve been seeing, e.g. here.
Are the service industries growing? Apparently. But the actual components that are growing are growing because of their subsidies.
Wait a minute. If it’s true that unemployment is hurting the economy because our economy is based on so much consumer spending, then for the moment any employment is good news. Long term, of course, not so good.
I’m surprised by utilities. Those I fork over money to say they are having trouble because of reduced demand and appear to be looking for rate increases.
If you broke off agriculture from the larger category, I wonder if it would be doing relatively well also. For one thing, it’s one of the few things America seems to export these days.
PD, their report isn’t an employment report, it’s a growth report. Utilities and healthcare have grown even as healthcare has shed jobs.
As to utilities I think that rate increases are probably a significant component of the growth. I don’t think that’s good news because higher energy costs will slow growth in other sectors (especially but not exclusively manufacturing).