Goods Are Good, Services Stink: Chart Of The Day

A curious thing happened on the way to (ever deferred) recovery: America's goods manufacturing sector has been resilient, and in line what one would expect from a recovery. So far so good: the problem as everyone knows, 70% of US GDP is based on "services." And it is here that things get very ugly. As the charts of the day below show, while "goods have been good", it is services that have stunk up the economy in the post-depression era, and are what the Fed has been unable to do anything to stimulate, and by implication have kept US GDP subdued at stall speed levels.

From Bank of America:

The nature of this recovery – with growth concentrated in goods rather than services – leaves the economy particularly vulnerable to an uncertainty shock. Unlike prior recoveries, the service side of the economy has remained disproportionately weak. The service sector shrank as a share of the economy over the past two years. That said, this was only a slight reversal from the multidecade trend away from goods toward services, which has left services as 70% of the economy. The shift last year toward manufacturing and away from services was not due to an exceptional boom in manufacturing. The contribution to GDP growth from manufacturing was akin to prior cycles. The sector gained market share because of an exceptionally slow recovery in services. Unlike the typical post-war recovery, this was not led by a resilient consumer. Households have been in the process of deleveraging in the face of a massive negative wealth shock. The reduction in household formation and home values also significantly reduced spending on housing services.

Goods are good:

But services stink:

Comments

[GetZeeGold]

The day is young....we can totally pull this off.

[realtick]

The trend on the services chart is a disaster. That one is definitely going to new lows.

On second thought, services and goods are both going to new lows, but services will apparently get there first.

[Omen IV]

just some personal experience from friends in various areas in USA - dentists which  supply discretionary services that can be deferred for some time before people have a serious problem and which in many cases non-reimbursable by medical insurance - are going thru significant downturn - not localized - this is an example of middle class  discretionary cash flow being constrained or reallocated - how far does it go? upper middle class professionals now affected by other working classes problems

[malikai]

But they said a strong dollar would kill exports. Have the kleptokeynesians been right about anything?

[chistletoe]

Did they think I needed them to tell me that services stink?

I don't even bother to call comcast help desk, or the power company, or heaven help me city hall.

And puhleeze don't let me apply for a refinance or new hazard insurance!!!!!

Its every man for himself down here in the trenches ......

[Sudden Debt]

Well, in a service based economy it's good to hear that goods are doing well....

it's all about the 1%...

[booboo]

The prostitution business in DC has collapsed since congress and the White House colluded to take it over.

[Shizzmoney]

So far so good: the problem as everyone knows, 70% of US GDP is based on "services."

Are stripper and hookers included in this?

[vast-dom]

no. that's rewards plus credit card activities to be paid back with another zero interest rewards plus card. that's later.

[ThisIsBob]

Exactly what are these "services" that Americans are not buying?

[disabledvet]

"WHATAWEWANT?"... "A WORTHLESS DOLLAR!"..."WHEN DO WE WANT IT?" ...."NOW!"

[LawsofPhysics]

Might have something to do with people figuring out that "financial services" is simply code for stealing your wealth.

The "services" at the massage parlor seem to be busier than ever.

[Mercury]

Well, for the most part 'goods' are less discretionary - so this isn't all that surprising.

Clearly we need to expand EBT card "access" x1000 and remove any limits as to what they can purchase.

[travelling man]

poor old america, farming out virtually all production brought you in a position like this. bad enough but imagine what that does to education on a longer time frame- no production will not need productive skills. hence ability to produce things disappears over time. welcome to a special form of austerity. try to buy all the stuff with a currency that will be worthless sooner or later

[LawsofPhysics]

With all the world using fiat, you just summarized the situation for the earth.  But I am an optimist, just wait, once the world becomes an efficient producer like Germany I am sure those other planets will start buying - FAIL.

[jayman21]

I did not junk you, but you should understand the education system.

Carlin - The Real
Owners Of America
6-24-8

 

"The real owners are the big wealthy business interests that control things and make all the important decisions. Forget the politicians, they're an irrelevancy. The politicians are put there to give you the idea that you have freedom of choice. You don't. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They've long since bought and paid for the Senate, the Congress, the statehouses, the city halls. They've got the judges in their back pockets. And they own all the big media companies, so that they control just about all of the news and information you hear. They've got you by the balls. They spend billions of dollars every year lobbying ­ lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else." 

 

"But I'll tell you what they don't want.  They don't want a population of citizens capable of critical thinking. They don't want well-informed, well-educated people capable of critical thinking. They're not interested in that. That doesn't help them. That's against their interests. They don't want people who are smart enough to sit around the kitchen table and figure out how badly they're getting fucked by a system that threw them overboard 30 fucking years ago. 

 

"You know what they want? Obedient workers ­ people who are just smart enough to run the machines and do the paperwork but just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it. And, now, they're coming for your Social Security. They want your fucking retirement money. They want it back, so they can give it to their criminal friends on Wall Street. And you know something? They'll get it. They'll get it all, sooner or later, because they own this fucking place. It's a big club, and you ain't in it. You and I are not in the big club."

 

"This country is finished."

[LongSoupLine]

but, but, we're stuffing warehouses and car lots with "goods"...how can we not be recovering?

[PatientZero]

Welh shit, son. Who'd a thunk it that making shit is good for solvency instead of pointless liquid 1's and 0's in a SQL database from services.

[BanjoDoug]

yes, I too see lots of goods on the car lots (channel stuffing gig), but where's the service, you know the polite, considerate service.    Do you see it at WalMart or HomeDepot or ???....   what I see is pissed off employees (for one reason or another) who couldn't be bothered to help customers.   The same is true at so many restaurants as well.   So, my dollars mostly stay in my pocket, or used for internet purchases, or used at APMEX. 

[Winston Churchill]

Hear you loud and clear.

Should be 'Servile industries".

[Dareconomics]

It seems that easy money is good for manufacturing, but its effects decrease when applied to the service sector.

Intuitively, this makes sense. You can put off that haircut for a week or two, but if your car is not running then you need to buy some parts or you can't go to work.

Perhaps, Fed monetary policy is an anachronism. Even though it lifts manufacturing, it is not 1959 where the majority of people work in some sort of goods production. The lion's share of the economy is the service industry.

Fed policy also lifts the stock market temporarily. Since Americans have been abandoning the stock market in droves since 2008, the temporary wealth effect reaches fewer and fewer families.

http://dareconomics.wordpress.com/

[Lester]

What fucking manufacturing?

What production and what farming? About the ONLY production done here is either of goods too large & heavy to make importation practical, or is for some government entity purchase that is mandated to be "made in USA"; if such mandates still exist.

Government actually paid our tax-dollars to firms that would relocate abroad. How's that for observing fiduciary duty to its people?

Perhaps Kucinich might have gone a step further and mandated that US Federal Govt take no action against the Best Interest of Its Citizens...

About everything done since 1970 would have to be overturned. Might be a start, legislate Govt at all levels observe Fiduciary Duties to their people...

[Lester]

What fucking manufacturing?

What production and what farming? About the ONLY production done here is either of goods too large & heavy to make importation practical, or is for some government entity purchase that is mandated to be "made in USA"; if such mandates still exist.

Government actually paid our tax-dollars to firms that would relocate abroad. How's that for observing fiduciary duty to its people?

Perhaps Kucinich might have gone a step further and mandated that US Federal Govt take no action against the Best Interest of Its Citizens...

About everything done since 1970 would have to be overturned. Might be a start, legislate Govt at all levels observe Fiduciary Duties to their people...