Is This the Beginning of the Next Recession?…“Significant risk” of “falling into contraction” with “worse to come.”
by Wolf Richter
WolfStreet.com
February 24, 2016
The US economy is largely service based. So when the “manufacturing renaissance” and “on-shoring” that everyone had been waiting for turned into no-shows, and when instead manufacturing started slowing in early 2015, it was no big deal, according to the meme.
OK, it was terrible for the folks who lost their jobs. But manufacturing accounts for only 12% of the US economy and employs only about 9% of the workforce. So overall, it’s not the end of the world, we heard constantly. And besides, we could always make it up with fast food.
Manufacturing alone can’t drag the US into a recession, we were assured. And the service economy would continue to be strong. That was the meme.
Then, a few days ago, Evan Koenig, Senior Vice President at the Dallas Fed, gave a presentation that showed that manufacturing contractions preceded service contractions in the run-up of the past two recessions. When service sector growth begins to dwindle – so still growth, but slower growth – after the manufacturing sector has already begun to shrink, that’s the point he called “prelude to recession.” And when the service sector begins to actually shrink, that event marks what officials will later call the beginning of the recession [read… “Prelude to Recession”: the Dallas Fed’s Unsettling Charts].
The Rest…HERE
