More Mixed Economic Signals From America

The Federal Reserve Chairman, Ben Bernanke has been saying that the US recession is over for the past couple of months. He may be right. Most analysts accept the common, but flawed, definition of a recession as two consecutive quarters where the Gross Domestic Product (GDP) is negative. But this definition is, perhaps, too narrow. It does not consider consumer confidence, nor unemployment trends and it is artificially pegged to four points over the course of the year.

This may explain why there are so many contradictory indicators popping up at the moment. For example, the US service sector has just reported the first expansion for over one year, according to the Institute for Supply Management (ISM). The ISM index rose from 48.4 in August (indicating contraction) to 50.9 (indicating growth) for September. ISM said that the job situation within the sector had improved. However, unemployment data for the States as a whole, released for September, showed that 263000 jobs had been shed and that took US unemployment to a 26 year high at 9.8% of the workforce.  The employment statistics have been worsening for 21 months consecutively now – but it is always darkest before the dawn: employment lags behind recovery. In the course of the current recession 17.6 million Americans have lost their jobs.

In Europe and Japan, unemployment has been breaking recent records. Figures show that Eurozone unemployment hit 9.6% in August; meaning 15.2 million workers are looking for jobs across the region. Japan reported a drop in its unemployment level from the record high 5.7% seen in August to 5.5% last month. That means that 3.6 million Japanese are out of work.