Sunday, June 8, 2008

Understanding the basics

Shouldn't someone who writes for an investing advice website understand the basics of Macroeconomics? I think so.

Micheal Shedlock, a "Registered Investment Advisor", claims a recession is obvious based on recent unemployment numbers.
The establishment data was the 5 consecutive decline.


34,000 construction jobs were lost
26,000 manufacturing jobs were lost
27,000 retail trade jobs were lost
29,000 professional and business services jobs were lost
8,000 service providing jobs were added
A total of 57,000 goods producing jobs were lost (higher paying jobs), and for the first time in quite some time, few service providing (generally lower paying jobs) were added. Government, the last pace one wants to see jobs, added 17,000 jobs or the service sector would have actually contracted.

Weakness is now nearly across the board. The last remaining holdouts is education and health services which added 54,000 jobs. But looking ahead there is going to be trouble in this area as states, especially California, cut back services.

These are clearly recession totals yet still we have pundits debating whether or not we are in recession.

So where is he wrong? Recession has a specific definition, and it isn't based on the number of jobs added or removed from the 'Economy'. As a matter of fact, some increase in unemployment could be linked to an upswing in productivity.

Now, this doesn't mean things are as good as they could be, but it's an inflationary issue, not a recession issue.

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