There cannot be a recession without a pullback in services.
Revenues in the major private-sector services categories rose 6.3% in Q4 2018, compared to the same quarter a year earlier, to $4.01 trillion, not seasonally adjusted, breaching for the first time the $4 trillion mark, according to the Commerce Department’s detailed Quarterly Selected Services Estimates released this morning. For the year 2018, these selected services rose 6.0% to $15.5 trillion. This is a massive part of the $20.5 trillion US economy.
But this 6.3% growth is not adjusted for inflation. The CPI for services in 2018 rose by 2.8%. Even that does not do justice to the price increases seen in some service sectors, such as trucking, some of which have not yet made their way to the consumer, and thus to the consumer price index.
This service data shows why the slowdown in the goods-based sector – which includes retail sales – from the red-hot boom for most of 2018 cannot by itself lead to a recession. Services matter the most.
So here are the biggies. This does not include all services, just the biggest segments and subsegments. None of the numbers have been seasonally or inflation adjusted.
Finance and Insurance, Biggie of the Biggies
This is the biggie among biggies. In Q4, revenues rose 8.0% year-over-year to $1.24 trillion. For the year 2018, revenues rose 7.6% to $4.84 trillion. This amounts to a whopping 24% of GDP – and 31% of all services.
When we talk about a “financialized economy,” this is why. It’s a huge and diverse industry. It makes a lot of things possible, but it is also a leech on the rest of the economy.
The overall category of finance and insurance includes the Federal Reserve (“monetary authorities/central bank”), whose 12 regional reserve banks are privately owned institutions. But with its $113 billion in revenues in 2018, it’s just a small line item. And its revenues declined by 3.1%.
Without the Fed, finance and insurance revenues rose 8.4% to $1.22 trillion in Q4; and 7.9% for the year to $4.73 trillion.
The largest segment is banking. This includes deposit-taking lenders (commercial banks, credit unions, and the like) and nonbanks (lenders that don’t take deposits): revenues in that segment rose 10.3% in Q4 to to $352 billion, and 9.7% for the year to $1.35 trillion.
In the table below, note that nonbanks have produced greater revenues than deposit-taking lenders. They did so in 2017 as well (if your smartphone clips the table, hold your device in landscape position):
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Finance & insurance | 1,244 | 8.0% | 4,839 | 7.6% |
| Finance & insurance (except the Fed) | 1,217 | 8.4% | 4,726 | 7.9% |
| The Fed | 28 | -4.9% | 113 | -3.1% |
| Banks & Nonbanks | 352 | 10.3% | 1,355 | 9.7% |
| Deposit-taking banks | 160 | 10.5% | 620 | 11.2% |
| Nonbanks | 165 | 11.4% | 631 | 9.3% |
| Activities related to credit intermediation | 27 | 2.8% | 105 | 4.2% |
| Securities, commodity contracts, and other financial investments | 172 | 5.4% | 684 | 7.7% |
| Securities and commodity contracts, intermediation and brokerage | 74 | 8.8% | 306 | 11.3% |
| Securities and commodity exchanges | 3 | 28.5% | 12 | 10.6% |
| Other financial investment activities | 94 | 2.3% | 365 | 4.8% |
| Insurance carriers and related activities | 693 | 8.2% | 2,687 | 7.0% |
| Insurance carriers | 596 | 9.0% | 2,304 | 7.1% |
| Agencies, brokerages, and other insurance related | 97 | 3.6% | 383 | 6.0% |
Healthcare and social assistance services.
The number two biggie of the biggies. But it does not include the goods-based portion of healthcare, such as pharmaceutical products, medical devices, supplies, etc. This is just services. Revenues rose 3.8% in Q4 to $678 billion; and 4.2% in 2018 to $2.65 trillion.
Healthcare services fall into four broad categories, as seen in the table below. The largest, “ambulatory services,” generated ($1.05 trillion for the year, up 4.5%), half of which are generated by offices of physicians. Ambulatory services also include dentists, other “health practitioners,” outpatient centers, medical and diagnostic services.
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Health care and social assistance | 678 | 3.8% | 2,648 | 4.2% |
| Ambulatory health care (doctors, diagnostics, outpatient, home health care) | 268 | 4.7% | 1,046 | 4.5% |
| Offices of physicians | 134 | 5.3% | 516 | 5.0% |
| Outpatient care centers | 37 | 5.0% | 142 | 5.0% |
| Medical and diagnostic laboratories | 13 | -2.3% | 51 | -0.2% |
| Home health care services | 22 | 7.5% | 86 | 6.9% |
| Other ambulatory health care services | 9 | 2.1% | 37 | 4.6% |
| Hospitals | 291 | 2.0% | 1,156 | 3.7% |
| General medical and surgical hospitals | 271 | 1.8% | 1,077 | 3.6% |
| Psychiatric and substance abuse hospitals | 7 | 2.6% | 27 | 5.3% |
| Specialty (except psychiatric and substance abuse) hospitals | 13 | 4.9% | 52 | 5.8% |
| Nursing and residential care facilities | 65 | 4.3% | 251 | 4.9% |
| Social assistance | 54 | 8.6% | 195 | 4.3% |
| Individual and family services | 28 | 13.0% | 103 | 7.2% |
| Community food and housing, and emergency and other relief services | 10 | 5.0% | 34 | -3.7% |
| Vocational rehabilitation services | 4 | 4.7% | 15 | 3.5% |
Professional services
Revenues in the third-largest services segment — professional services — grew 5.6% in Q4 to $505 billion; and 6.4% in 2018 to $1.95 trillion. This sector is dominated by “computer systems design and related services,” which generated $115 billion in Q4, up 10.9% year-over-year; and $436 billion in 2018, up 9.1%.
And “legal services” in the world’s most litigious society, rose 4.5% in Q4 to $93 billion, and 7.1% for the year to $328 billion:
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Professional, scientific, and technical services | 505 | 5.6% | 1,950 | 6.4% |
| Legal services | 93 | 4.5% | 328 | 7.1% |
| Accounting, tax preparation, bookkeeping, payroll services | 40 | 5.1% | 179 | 3.3% |
| Architectural, engineering, and related services | 83 | 1.6% | 339 | 5.5% |
| Computer systems design and related services | 115 | 10.9% | 436 | 9.1% |
| Management, scientific, technical consulting services | 70 | 3.3% | 272 | 4.2% |
| Scientific research and development services | 47 | 10.2% | 174 | 12.5% |
| Advertising, public relations, related services | 28 | 1.5% | 105 | 0.4% |
Information Services
Revenues in this industry rose 7.9% in Q4 to $440 billion, and 7.3% for the year to $1.65 trillion. Telecommunication services dominate, with $625 billion for the year (up 1.3%). But the fastest growing segments were software publishers, with revenues of $258 billion for the year (+15.0%); and data processing services, $183 billion for the year (+17.5%):
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Information services | 440 | 7.9% | 1,646 | 7.3% |
| Publishing industries (except Internet) | 95 | 10.9% | 350 | 10.2% |
| Newspaper publishers | 7 | -4.6% | 25 | -1.8% |
| Periodical publishers | 7 | -4.0% | 27 | -4.0% |
| Book, directory and mailing list, other publishers | 10 | -5.2% | 40 | 1.0% |
| Software publishers | 72 | 17.3% | 258 | 15.0% |
| Motion picture & sound recording industries | 29 | 6.2% | 111 | 7.2% |
| Broadcasting (except Internet) | 47 | 7.2% | 171 | 6.6% |
| Radio and TV broadcasting | 24 | 12.3% | 85 | 9.3% |
| Cable and other subscription programming | 22 | 2.2% | 87 | 4.0% |
| Telecommunications | 161 | 2.1% | 625 | 1.3% |
| Wired carriers | 79 | 0.6% | 312 | -1.1% |
| Wireless carriers (except satellite) | 70 | 2.5% | 265 | 2.9% |
| Other telecommunications | 12 | 9.8% | 48 | 9.8% |
| Data processing, hosting, related services | 49 | 14.4% | 183 | 17.5% |
| Other information services | 59 | 17.2% | 205 | 14.9% |
Administrative, support, waste management, and remediation
Revenues in this category jumped 8.8% in the quarter to $262 billion, and 7.4% for the year to $998 billion. The category is mostly composed of administrative and support services, employment services, travel arrangement and reservation services. A small and somewhat incongruous sliver is the sub-category of waste management and remedial services.
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Administrative, support, waste management, remediation | 262 | 9.3% | 998 | 7.4% |
| Administrative, support, employment, and travel reservation services | 236 | 9.6% | 897 | 7.7% |
| Waste management and remediation services | 26 | 6.3% | 101 | 4.6% |
Transportation services
This broad and complex category ranges from transporting passengers by air to transporting crude oil by pipeline. Revenues in this sector rose 8.3% in the quarter to $253 billion; and 7.1% for the year to $983 billion.
The fastest-growing category was truck transportation, surging 9.0% in the year to $295 billion, with the subcategory of “general freight trucking” up 11.9%. The phenomenal trucking boom through most of last year was fired up by sharply rising shipments; and freight rates surged by the double-digits. Growth in shipments started to taper off late last year, but freight rates remained in surge-mode throughout the year (see my reporting on trucking and freight). And this is reflected in the table of industry revenues below:
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Transportation and warehousing | 253 | 8.3% | 983 | 7.1% |
| Air transportation | 56 | 7.3% | 223 | 6.5% |
| Water transportation | 11 | 7.8% | 45 | 7.0% |
| Truck transportation | 75 | 8.8% | 296 | 9.0% |
| Transit and ground passenger | 10 | 2.6% | 39 | 1.9% |
| Pipelines | 14 | 9.3% | 51 | 9.1% |
| Scenic, sightseeing transportation | 1 | -1.1% | 3 | -3.7% |
| Support activities for transportation | 50 | 8.8% | 193 | 5.5% |
| Couriers and messengers | 26 | 9.6% | 97 | 8.8% |
| Warehousing and storage | 10 | 11.2% | 37 | 5.8% |
Rental and leasing services
This category is dominated by services related to renting and leasing real estate. But it also includes services related to renting and leasing cars and trucks of all sizes, equipment across the spectrum, and consumer goods (the rent-a-couch). Revenues rose 7.3% in the quarter to $184 billion; and 5.9% for the year to $703 billion.
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Rental and leasing, real estate, auto, etc. | 184 | 7.3% | 703 | 5.9% |
| Real estate | 127 | 7.9% | 483 | 5.2% |
| Lessors of real estate | 72 | 7.2% | 274 | 5.6% |
| Offices of real estate agents and brokers | 29 | 5.1% | 109 | 0.8% |
| Rental and leasing services | 45 | 7.8% | 172 | 7.7% |
| Auto, truck, equipment rental & leasing | 17 | 8.9% | 65 | 7.6% |
| Consumer goods rental | 6 | 3.7% | 23 | 0.4% |
| Commercial, industrial machinery, equipment | 22 | 8.1% | 82 | 10.0% |
| Lessors of nonfinancial intangible assets (except copyrighted works) | 13 | 0.1% | 47 | 5.7% |
Utilities
This measure of utilities does not include government-owned utilities. The measure accounts for services such as line charges for distribution, etc., but not revenues from the actual products (such as natural gas) which are goods. Services revenue in this sector rose 4.0% in the quarter to $146 billion; and 3.1% for the year to $597 billion:
| Utilities | 147 | 4.0% | 597 | 3.1% |
| Electric power generation, transmission and distribution | 111 | 2.2% | 474 | 2.0% |
| Natural gas distribution | 32 | 11.2% | 108 | 7.9% |
| Water, sewage and other systems | 4 | 0.7% | 15 | 2.8% |
Arts, entertainment, and recreation:
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Arts, entertainment, and recreation | 72 | 6.2% | 277 | 4.2% |
| Performing arts, spectator sports, & related | 35 | 8.4% | 125 | 5.7% |
| Performing arts companies | 5 | 13.0% | 19 | 9.3% |
| Spectator sports | 14 | 4.5% | 45 | -0.1% |
| Promoters of performing arts, sports, and similar events | 8 | 4.9% | 30 | 5.7% |
| Agents, managers for artists, athletes, entertainers, and other public figures | 3 | 26.2% | 10 | 17.6% |
| Museums, historical sites, and similar | 4 | -16.0% | 16 | -5.3% |
| Amusement, gambling, and recreation industries | 33 | 7.3% | 135 | 4.1% |
Accommodation services
This the only category here that booked a revenue decline for the year 2018, though Q4 showed some year-over-year growth:
| Q4 2018, $ billions | Change fr. Q4 2017 | Year 2018, $ billions | Change fr. 2017 | |
| Accommodation, traveler and RVs | 60 | 2.5% | 246 | -1.7% |
There are other services in the US that are not included here. Government services are also not included either. These are just the biggies in the private sector. And most of these categories, except accommodation services, had strong growth rates in 2018. Finance and insurance came out on top, not only with by far the most revenues ($4.8 trillion), but also with the highest growth rate (7.6%); and some sub-segments had double-digit growth rates, as is befitting for an increasingly financialized economy.
The goods-based sector is smaller and much more volatile. It went into a recession in 2016, but this massive apparatus of service businesses kept growing, though at a slower rate, and overall the economy eked out 1.6% GDP growth that year. Only when the services sector gets close to stalling can a deep recession in the goods-based sectors drag the overall economy into a recession.
The Fed has a new plan for its balance sheet; and in relationship to GDP, it will continue to shrink until some magic unknown point is reached. Read… Fed’s New Balance Sheet Plan: Get Rid of MBS
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
I take it that this article indicates you have capitulated and are now a stock market bull.?
No recession +dovish fed= further gains in stocks?
Hahahaha, that’s funny.
The equation is the other way around: no recession = no rate cuts and no QE = big disappointment on Wall Street = hard time for stock market.
This is logical as far as it goes.
However back to real world. I’m sure more than a few have noticed the abrupt Fed flip flip in response to nothing except a 10% Mr Market hissy fit. No liquidity issues, no financial freezes, no crisis, just a stock market hissy fit.
Or the fact the Fed has been and still is in eternal easing mode going on for more than 10 years, seemingly irrespective of what the economy does.
Didn’t the Fed just say no more rate hikes for 2019? That means it’s easing in the face of a not recession (or recession) if there isn’t one. Easing help assets not the economy. And we know easing doesn’t help the economy it hurts it, so what’s the point then?…except to serve Mr Market.
If QE and rate cuts have damaged not helped the economy, why halt normalization? Halting normalization when none of dangers you mentioned exist, means only one thing: More bad news for the economy.
The only thing that makes sense – as in explains the largest amount of data – is that the Fed is an obedient servant of Mr Market.
Exactly …. Janet Powell is a good girl –
She does what she is told.
How long could the services sector grow or stay healthy if the entire durable and consumable goods market was in a recession? How real is the idea of a services economy or is such a thing only possible during a period of great credit (debt) creation like the last 40 years?
“How real is the idea of a services economy ” ?
Very real. The USA is very broad and diversified in both goods and services. That’s a big part of it’s appeal.
In the last days of Rome, it was bread and circuses … It is becoming more obvious by the day in the U.S. that while we have a very strong ‘circus sector’, the ‘bread sector’ is showing structural and literal decline.
In late 2015 and in 2016, the goods-based sector was in quite a funk with the oil patch spiraling down due to cutbacks and layoffs in the oil-and-gas sector. This also impacted the service sector (a lot of services involved). And junk-rated credit was starting to freeze up. The services sector slowed down some, and I covered that back then, and there were worries that it would slow down enough for a recession to kick in, but it never did.
There are a lot of stabilizing factors: health care and finance – and they’re huge. Plus governments at all levels; they’re not cutting back unless they’re faced with a crisis. Rents too kept rising, and so on. New unemployment claims never really ticked up beyond the range… it was just slower growth, not a decline.
“Plus governments at all levels; they’re not cutting back unless they’re faced with a crisis.”
No, they’re not are they, and they are there to serve us good and hard, endlessly expanding in relation to the real economy – they trail on the up then stand out as saviours on the down, the self fulfilling prophecy of a wider discapacity.
In the US government is 38% of gdp, in France almost 58% .
That is quite a lot of “service” in my book.
Bankers:
I posted this, yesterday.
“Government Debt to GDP in the United States is expected to be 108.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations.”
Debt out the wazoo (Wolf S term) in a booming recovery with proposed cuts NOW in every sector but the military and Wall const. :-) What can go wrong. “What, me worry”? (Alfred E Neuman)
cheers
Great report. Easy to read. Thank you.
I have a bad habit of giving too much weighting to the ($6 trillion) retail sales report that the Census Bureau releases in the middle of every month.
The $4 trillion services is higher value revenue and thus more valuable to the $20 trillion US economy as you said.
akiddy111,
There is some typo in your comment. As you said, retail was about $6 trillion in the year 2018; but the services industries on this list were $4 trillion in Q4 and about $15.5 trillion in the year 2018. About 2.5x retail.
The banking index, bkx looks like crap. Just saying.
Is crap a bad word? Why wait for moderation? Just stating obvious.
Bluedog,
No, “crap” is not a bad word. Your comment got hung up in the spam filter, which is very aggressive and looks at things like which server the comment gets routed through, etc. I don’t control the spam filter. But thank god it’s there. It has caught 100% of the spam so far, and catches non-spam along with it. Comment spam is a nightmare. So be patient.
Yes, check out my reply to Hermes above.
It’s all inflation. In fact, the 6,7, 8% increases seen in these services feels about right with what our true inflation is today.
Truth be known, some of these service sector are actually stagnant or even shrinking in overall size (jobs) but inflation in revenues (due to inflation in costs as well as increases in salaries/wages) hides that.
Much of the inflation in the US results in stagflation for those with jobs that have no leverage for wage increases. This ~ 60% cut non-essential spending and those industries get hit. For those in jobs with varying levels of wage leverage, life goes on when cost of living goes up.
Eventually it gets so bad for the ‘no leverage’ folks that something has to give. If you think Trump is bad, give this a few more years.
With 2.8% inflation in services, the Fed may not be pausing interest rate hikes for long.
Now more than ever the service sector has eclipsed manufacturing as the dominant economic activity within the United States.
Mind you my grandfather actually left the farm to work for a small soap manufacturer which somehow allowed my father to become an attorney.
However, it boggles my mind to see the manufacturing hub of the world, shift to Japan and then China, surely the highly volatile nature of the service industry, will eventually peter out.
Dominant? Services is about 80% of the U S economy.
I know. It’s easy spew the “US don’t make nuthin’ no mo'” mantra. After all, it’s just accepted as pure inarguable fact.
Right?
Wrong.
It’s just not even close to correct. A monkey with a keyboard and a search engine can figure it out in less than 30 seconds.
And, mind you, my grandfather was a well digger and a carpenter, which “somehow allowed” my father to become a CPA.
“Somehow allowed…”
Maybe it’s because every $1.00 generated by manufacturing generates approximately $1.90 in the services sector?
Or maybe it is because when our combined grandfathers lived, Gaia’s population was 1, maybe 2bn, so there was room available for the at the time assumed natural progression for (in my case), a railway maintenance guy to raise 5 professors, surgeons and consultants.
Now that there is 7.7 bn of sapiens around, and all of those with brains want to be doctors, lawyers, architects and accountants (see how I cunningly exclude those who want to spend their lives being tv presenters or playing video games), Gaia can no longer provide customers. That market is crowding itself out of existence.
This has and will continue to have a direct impact on social benefits systems in all western economies that (still, and soon no more) have such arrangements in place.
Personally, I’d be happy if my offspring had natural food to eat 20 years from now.
Cheerio!
Well, that’s depressing.
My boss’s dad worked for the post office and sent 5 kids to private schools and then colleges on that, and they all grew up in the same house they were born in.
My boss is trying to hang on, and might just about make it.
It’s poorer and poorer each decade. His kids are going to be lucky if they can stay under a roof, and the family’s gone from 5 kids to 3 to 1.
My own family went upper-middle to middle to poor, and from the five of us to zero. It’s just poorer and poorer each decade.
I have trouble reconciling 6% services revenue growth with the Atlanta Fed’s .3% GDP growth estimate this quarter. The data seems all over the place.
Yeah, but this data is from 2018q4, we wont get something like this on 2019q1until 2019q2 is almost done, and something tells me based on bond and credit markets are trading now we’ll already have direction by then.
It’s too early for the Atlanta Fed GDPNowto be a good indicator. It still lacks a lot of Q1 data. We’re just now getting Feb data. Q1 is going to be lousy, no doubt. But it might not be that lousy.
What about NY Fed Nowcast 1st qtr at 1.29% (March 22)
It was first 2.1 > 1.88> 1.44 and NOW 1.29%!
https://www.newyorkfed.org/research/policy/nowcast
I think that could be closer.
The workload in my Engineering business is way down from last year. Probably -50% or more, once again it’s as if somebody turned off a switch and the work has dried up. I usually feel the recessions coming before most everyone else but we’ll see. If it continues like this until June i’m going to have some difficult decisions to make.
Good luck.
My primary curiosity right now is that Semiconductors are obviously very weak. MU, NVDA etc. Yet the SOX hit a new high.
Korean exports have tanked too.
Korea is an important trade indicator. It may be isolated. It’s worth paying attention to see if there is something more to this.
A “finance and insurance” sector representing 31% of all services and growing like crazy makes my hair stand on end.
This whole circus feels like an elaborate scam to me. Pump more and more funny money into the system, siphon it off in a million places before it can reach the great unwashed, and proudly present your impressive “profits” to an unsuspecting world.
Arguably the “finance and insurance” sector can not keep growing forever. I wonder how much time the host economy has left before these parasites finally kill it stone cold dead.
“Arguably the “finance and insurance” sector can not keep growing forever”
Sure it can, just add more money and use it to insure against failure :-/ . The real trouble is…well imagine someone gets to go around assigning values as they please, buying what they like because they have an endlessly deep pocket, reassuring everyone else by the same way. What they are doing is displacing the previous framework, a framework that would have had its own checks and balances. I think at some point you end up with a wtf moment, even if it is just because no-one really knows what anything is about anymore and not product of an attempt to hold account. That can result in hyperinflation, or social breakdown, political extremes etc.
So financial exuberance, increasing government, socialisation, should all make people perk up as they tend to be interelated in ways few would care to consider.
I wash your laundry. You wash mine. Our solicitors draft precise contracts for this exchange of services. Our respective accountants draft books and tax computations. The guys from our Councils come around (in swarms), to ensure there is no racial or sexist or transgender jiggery pokery going on. There is about 20 of us fully employed in this worthy endeavour and our Chancellor is grateful for the contributions we make to the ever important GDP.
Yet not one single participant in this musical chairs ponzi is doing anything material. No one is baking bread, no one is herding goats. No one is building a house.
Homo Sap confused with that. Maybe robot come and extract Sappi brain so all good and GDP go grow to moon and beyond.
As in some kind of revelation, I thought of an improvement to my preceding scheme.
We could both source some money people, say, someone to provide the financing to our laundry operations. Like, detergents, coins and general leisure money. Those gals and fellas could then repothytecate our operational expenses to some sleepy elderly people overseas, under a label of a guaranteed above average returns for their retirement funds. Via their own specialist money advisers, as well as the necessary legal accounting and regulatory backup people. Therefore bringing the total involved to around 40. The Chancellor is about to have a fit with all this money gushing into his coffers.
I should try and patent this process, there must be some way to make money out of it.
Love your comments. Couldn’t have said it better.
But we don’t pump funny money into the system anymore…
The worldwide financial system is fully interconnected and interdependent. Things done in the US are felt in China, the EU, Japan and so on, and the other way round.
Mr Powell has been convinced of the errors of his ways /s, the EU has given up before it even started and the others have never even stopped pumping.
An overview: The term “Post-Industrial Society” has been extant for some time. It’s not surprising that the economic statistics reflect that.
“Post Industrial Society”
Right you are. Serve. To serve. Provide service.
The so-called “service economy” is an oxymoron.
The service sector is there to serve the economy. Not the other way around. A nation of cooks with nobody to grow the food.
Banking is there to facilitate manufacturing and trade. Not to be the end all . A nation of financier’s with no one to finance but themselves!
Insurance? Ha! One of the chief leaches upon society.
The REAL economy is on it’s deathbed. About to totally expire.
The way many behave these days, it’s also looking like the Post-Society Society…..
When you see major export countries manufacturing PMI plunge….it gets concerning. Regardless of the strength in our service sector, it tells me to get prepared.
Also the 3 month inverted with the 10 year this morning, which means we have on average 311 days until next recession.
You hunt for the next great investment and it’s slim pickings. Not Australia, Korea, Germany, US, Canada, etc etc.
No recession? “Permanently high plateau” ?
“Yield Curve Inverts For The First Time Since 2007: Recession Countdown Begins”
The handle at all the racetracks around the world was an indicator of imminent recession. It proved true in the past 100 percent of the time. When the handle fell recession was assured. Attendance didn’t matter. I haven’t been following it since newspapers dried up or went the way of the dinosaur.
I believe your observation to be accurate, The Real Tony. One of the best indicators of recession is a decline in “vice” spending, such as gambling.
I don’ t see restaurants anywhere. Aren’t the cooks and servers providing a service lol
This is a huge sector with 800 billion sales in 2017, so less than insurance at 1.2 trillion BUT employing 14 million people against 2.7 million for insurance.
It is a very important thermometer of the economy because although there is no alternative to house and car insurance, there is an alternative to eating out.
It can contract very quickly especially the ‘white table cloth’ segment.
Yeah, well, these categories get a little quirky when they’re mixed. Restaurants and bars sell goods, and they provide a service. But they’re included in retail sales (goods) as “food services” which I report on regularly, most recently here:
https://wolfstreet.com/2019/03/11/sales-bars-restaurants-shine-auto-dealers-suffer-retail-sales-growth-middle-of-8-year-range/
Health care is a sewer in this country. Money flush for worse care. It’s only gotten worse since ACA
Consumer debt has exceeded record levels of 2007 – nearly tapped out. Sell at the top, it’s gonna be a wild ride down. ;)
The financial sector XLF is in a downtrend since
Jan 2018, with lower highs and lower lows.
The DJ transportation is in a downtrend since Sep 2018.
The CPI is up, but US treasury 3 month @ 2.455 is higher than the 10 years @ 2.443.
Everything in between is lower than the # month. 10Y – 3M = (-)0.012.
The US yield curve is a hump, above water, but inverted.
The German 10 year have sunk without oxygen tank.
Underwater again.
Everything from overnight to ten years is in a negative territory.
Yesterday, it hit the 2015 support line, popup 24% in one day, but sunk today.
Every week, on the DJI, for eight weeks, the weekly bars closed at the,
top of green bars, but lately, the DJI is shortening the thrust, becoming flat
A cause was built ==> the Ironman started today.
At one point agriculture employed a large portion of the work force but industrialization forced it down to less than 5%. Its possible the same thing is happening to manufacturing. The global labour arbitrage, robotics, artificial intelligence and reserve currency status are all factors influencing this in the US. Autos etc have always been deep cyclicals and this suggests the declining influence of manufacturing as a whole may dampen its impact on the business cycle. This may also have a dampening effect on those countries which are dependent on exporting manufactured goods.
This may explain the Feds reaction to the recent fluctuation in equity prices. Financial asset prices do matter and that changes in pricing do feed into consumption quickly. US household net worth is about 500% of GDP of which real estate and small business values making up less than 50 percent. This leaves large equity and bond holdings whose price action is a significant trigger for increases and decreases in consumption. Is it possible this cyclical trigger may be exerting an influence similar to the trigger traditionally found in the goods producing sector?
Services is by nature a measure of inflation. Those jobs that are supposed to be coming back, anyone seen them?
I think the jobs coming back would be hard to pick out, from the large number of jobs still moving south and east……………..
Yield curve just inverted.
QED
QED what? That this is the most central-bank-manipulated bond market ever? Parts of it inverted a while ago. Today more of it inverted. Before then it was nearly flat for over a year. It has not been a reflection of the real economy since QE and ZIRP started.
QED is for those of us who have been skeptical all along that the Fed would have the cajones to keep raising rates and fully reverse QE to normal conditions.
The market has all along been signaling a similar skepticism which is why the yield curve has been flattening since the Fed started raising rates. Only one of two things could happen – the higher rates would send the economy into a recession or the Fed would sense a recession coming, and either way, the rate raising would stop. Which means long term the rates were not going to get higher. The market knew that.
Low rates mean more debt continuing to pile up. Baaaaaad junk debt. This can only end in one way, another debt bomb explosion
Expect Netflix to go down the tubes now that Disney owns Fox and is with holding content for its own Hulu service. CHS the giant hospital chain is in deep debt trouble. What would FANGMAN stocks be without the first “N”?
I enjoy reading your posts and value your thoughts on the economy.
All data of course is not created equal. Why is the service data a reflection of economy, but the bond market not? To me it seems the QE has vastly manipulated this data as well, sending the prices of rents, etc up. Maybe this is not a correct interpretation?
Turkish Lira collapsed 5% vs. Dollar today.
The current 10Y – 3M at zero.
The weekly close will be above.
The Fed will do nothing, will not change rates much or at all.
The 10Y – 6M is still at negative territory, but who care : the Fed will saved the day.
Sentiment impaired, markets might lurch down, but the Fed will not prevent the next correction, like in 2000/ 02 or 2007/ 09.
The Fed will do a certain emergency repair job, but cannot control gravity, or act of god…
China & Europe are getting worse, but the ME will top them all.
The insurance category must be dominated by health insurance. It is illustrative to look the insurance category versus healthcare category. Of course there are many hidden details here, such as non-insurance/government Medicare/Medicaid paying for a good chunk of the healthcare. But nevertheless, at first I was baffled by the size of the insurance category.
Healthcare bubble, anyone?
If rising asset values, financial fees, rents and insurance premiums are a positive, keeping us out of recession, I can’t help but wonder if the current definition of recession really has nothing to do with the main Street economy.
A lot of the government measures give screwy numbers in the eyes of a median employee these days.
I’m sure this is partly because of the technical definitions being a bit contrary to perceived meanings.
However, the primary reason these measures come out screwy is the way that massive global easing and QE messes with the price signals so that they don’t quite mean what they used to.
I’m not saying we’re in recession now, just that most people perceive boom times as higher discretionary spending (like autos, electronics, appliances) and not just higher costs of living (like rents, bank fees and insurance premiums).
Why is the XLF going down then?
Because.
Plus, banks had a huge run. Stocks had a huge run. Just about everything is overvalued. See March 2000; see 2007. Stocks don’t go up forever. They just don’t.
Plus, banking-specific, when the yield curve flattens or inverts, it’s harder for banks to make money on the spread between their cost of funding (short-term, such as deposits) and their loans (long-term).
I work in high tech and my barometer for a slowdown is how many recruiters call/email me a week. Right now it averages about 5, one a day. When I see that start to drop to one every other day, I’ll know something’s up.
And I mean real recruiters not Sanjeev from an Indian sweat shop. Those I get about 100,000 an hour it seems, which all go to the spam folder.