Service sector contracts more in July than June

posted at 1:35 pm on August 5, 2009 by Ed Morrissey

CNBC has some mixed news on the economy this morning, indicating that the American economy has not yet turned a corner.  On the plus side, manufacturing rose in June, but slower than it did in May.  On the negative side, the services sector — 80% of the American economy — contracted in July rather than expanded as expected:

The U.S. service sector contracted in July at a faster pace than in June, according to a report released Wednesday.

The Institute for Supply Management’s services index fell to 46.4 last month from 47.0 in June, below economists’ median forecast for a rise to 48.0. The dividing line between growth and contraction is 50.

The services sector represents about 80 percent of U.S. economic activity, including businesses such as banks, airlines, hotels and restaurants.

That throws a dash of cold water on the suggestion that the US had turned a corner on economic pain.  The Obama administration has been patting itself on the back for rescuing America from a depression, even though no one can detect any impact from the White House/Congressional stimulus package.  July represents the start of the third quarter, where the administration had expected to see growth, especially after the -1.0 GDP in Q2.  Increasing contraction in the services sector makes that more difficult to achieve and portends lower revenues than expected for the Treasury — which means even higher deficits than predicted.

Even the manufacturing news is a mixed bag.  The Commerce Department showed a 1.1% increase in orders in May, slowing down to 0.4% increase in June.  That beat analyst expectations, but also indicates that the growth in manufacturing may be petering out at the same time as the service sector contracts.  Orders for big-ticket items like cars and appliances fell 2.2% after rising 1.3% in May, which may track with declining consumer confidence after a boost in spring that came with the stimulus package.

All of this hints at a higher unemployment rate, the figures for which will be released by the end of the week.  If that number continues to rise, expect consumer confidence to decline and these numbers to get worse.  It’s far too early to celebrate the end of the recession.


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Hussein is in Elkhart Indiana today to tell the people that help is on the way. I wish I could be there in the audience…..

UltimateBob on August 5, 2009 at 1:39 PM

On the bright side, we’re gonna be seeing a lot more people that aren’t well dressed. Or well fed.

LibTired on August 5, 2009 at 1:39 PM

But the State Media keeps saying the recession is over?

Somehow this is the fault of BOOOSH!

wildcat84 on August 5, 2009 at 1:39 PM

All of this hints at a higher unemployment rate, the figures for which will be released by the end of the week. If that number continues to rise, expect consumer confidence to decline and these numbers to get worse. It’s far too early to celebrate the end of the recession.

The filthy liar in the White House is quickly establishing a credibility gap. The more he is out there touting the success of his massive spending without result, the more he loses credibilty.

highhopes on August 5, 2009 at 1:40 PM

Details, details…but did yoe see how successful cash 4 clunkers was???
/sarc

Conservalicious on August 5, 2009 at 1:40 PM

Crap, forgot to add this… I wonder when Mr Flag is going to want people to turn in those spreading “disinformation” about the wild and prosperous Porkulus fueled Obama recovery?

wildcat84 on August 5, 2009 at 1:41 PM

On the bright side, we’re gonna be seeing a lot more people that aren’t well dressed. Or well fed.

LibTired on August 5, 2009 at 1:39 PM

Funemployment has risen over 8% during this administration.

highhopes on August 5, 2009 at 1:41 PM

Hey, all we need is more bailout! They solve everything.

/sarc

Barry, 2008 called and they want their popularity back.

Oil Can on August 5, 2009 at 1:42 PM

Reported to the White House Ministry of Information Refutation!

I just have one question for you all: Why so capitalist? Don’t you know the true virtues of socialism?!

Enoxo on August 5, 2009 at 1:43 PM

I have a feeling Obummah wont be getting a good reception in Elkhart.

I can picture those angry mobs right now!

becki51758 on August 5, 2009 at 1:43 PM

The hits keep on coming for Bozo and his fellow tools.

txag92 on August 5, 2009 at 1:43 PM

I’m pretty sure that only the koolaid drinkers will be allowed to be on camera in Elkhart.

Conservalicious on August 5, 2009 at 1:44 PM

Hussein is in Elkhart Indiana today to tell the people that help is on the way. I wish I could be there in the audience…..

UltimateBob on August 5, 2009 at 1:39 PM

One is left to wonder when it will dawn upon the beleaguered citizens of Elkhart, who build the very recreational vehicles that Obama’s policies would destroy through various policies, will wake up to the fact that the guy who is preaching to them is in fact their executioner.

It would be poetic justice indeed to come home from work tonight to find a youtube of someone in the audience giving Obama the dressing down that he so richly deserves.

(critiques of this post can be forwarded to flag@whitehouse.gov)

turfmann on August 5, 2009 at 1:44 PM

If anyone has been listening to Peter Schiff lately, the guy who called the recession two years ago, you’d be far less confident about any glimmer of recovery than what is spewing out of washington.

Tman on August 5, 2009 at 1:44 PM

Increasing contraction in the services sector makes that more difficult to achieve and portends lower revenues than expected for the Treasury — which means even higher deficits than predicted

I think the revenue & deficit charts will need to be updated….keep patting yourself on the back big O

cmsinaz on August 5, 2009 at 1:46 PM

Why so … well-dressed

faraway on August 5, 2009 at 1:46 PM

Bureau of Labor Statistics scheduled to release next unemployment data on 07 AUG @ 0830 EST.

ted c on August 5, 2009 at 1:47 PM

The OMB needs to be re-educated.

ICBM on August 5, 2009 at 1:47 PM

I have a feeling Obummah wont be getting a good reception in Elkhart.

becki51758 on August 5, 2009 at 1:43 PM

It’s already happened and it was your usual invitation only audience of mindless supporters.

highhopes on August 5, 2009 at 1:48 PM

I have a feeling Obummah wont be getting a good reception in Elkhart.

I can picture those angry mobs right now!

becki51758 on August 5, 2009 at 1:43 PM

Black Panthers and ACORN will be screening to keep the “well dressed” out.

farright on August 5, 2009 at 1:49 PM

Texas is in better shape than most states, but I am seeing people who are afraid to spend or make any kind of investment. With Obama in office, spending is on hold.

TXMomof3 on August 5, 2009 at 1:51 PM

Why so … well-dressed

faraway on August 5, 2009 at 1:46 PM

That’s a nice suit you got there… shame if anything happened to it.

LibTired on August 5, 2009 at 1:52 PM

Enough with the town hall meetings in Iowa, Ohio, Indiana and Illinois.

When is Obarfy scheduled to have a town hall in Texas?

Yee-haw!

fogw on August 5, 2009 at 1:52 PM

no wonder i’m getting price improvements on mortgage rates. the bond market loves bad news.

DrW on August 5, 2009 at 1:55 PM

When is Obarfy scheduled to have a town hall in Texas?

fogw on August 5, 2009 at 1:52 PM

when unicorns fly

farright on August 5, 2009 at 1:57 PM

The hits keep on coming for Bozo and his fellow tools.

txag92 on August 5, 2009 at 1:43 PM

Great clip. Saw this last night on TV (either O’Reilly, Beck or Hannity, can’t remember which).

On the outside, Krugman looks just like the shifty eyed, intellectually dishonest little worm that he truly is on the inside.

UltimateBob on August 5, 2009 at 1:57 PM

Hold on now, in a different thread dcwvu claimed that the economic indicators were all trending up, indicating that Ogabe had rescued the economy and boom times were on the way.

I guess Ogabe forgot about this 80% part of the economy.

Bishop on August 5, 2009 at 1:59 PM

Black Panthers and ACORN will be screening to keep the “well dressed” out.

farright on August 5, 2009 at 1:49 PM

Indeed… but just as a backup, in case some radical right wing nuts happen to slip past the Obama screeners.

UltimateBob on August 5, 2009 at 1:59 PM

More bad news:

Challenger report: Separately, outplacement firm Challenger, Gray & Christmas Inc. reported that the number of job cuts announced in July spiked 31% to 97,373, bouncing off a 15-month low in June. July marked the first increase in monthly job cuts since January.

BPD on August 5, 2009 at 2:00 PM

Details, details…but did yoe see how successful cash 4 clunkers was??? /sarc
Conservalicious on August 5, 2009 at 1:40 PM

I’m starting to wonder about all this. How much of the manufacturing and the GDP is being artificially propped up by GM’s otherwise inexplicable actions of late?

Remember, GDP is GROSS domestic product, not net. GM was already losing money on every car sold before. Adding a $4500 discount to each one (not counting the disposal costs) couldn’t have helped the bottom line. Taking working vehicles off the road provided no net increase to mobility, consumerism or industry. And who the Hell even knows how many bad loans they made to get those sales?

Obama isn’t just cooking the books; he’s manipulating every aspect of America’s automitive and finance industries to run the short-term numbers up at the expense of all else. If he were a civilian CEO, he would be on his way to prison by now.

logis on August 5, 2009 at 2:00 PM

he’s manipulating every aspect of America’s automitive and finance industries to run the short-term numbers up at the expense of all else.
logis on August 5, 2009 at 2:00 PM

I’ve had this gut feeling that this was occurring as well.

ted c on August 5, 2009 at 2:03 PM

The Obama administration has been patting itself on the back for rescuing America from a depression, even though no one can detect any impact from the White House/Congressional stimulus package.

Wrong!

Americans are more depressed than ever.
<a href=”“>They are taking more prescription anti-depressants than ever.
Those RX purchases are stimulating the economy.

You have to look at it from the proper perspective.

VibrioCocci on August 5, 2009 at 2:04 PM

If you go to a restaurant try to find out if your waiter/waitress voted for Teh One and if so, conspicuously don’t leave a tip. Let them know you’re redistributing the money to someone more deserving, someone that didn’t contribute to the take down of the economy. Try to get as many Obama supporters laid off as possible. If anyone should suffer it should be them.

DerKrieger on August 5, 2009 at 2:09 PM

Hussein is in Elkhart Indiana today to tell the people that help is on the way. I wish I could be there in the audience…..

UltimateBob on August 5, 2009

I’m about fifteen miles away and I wouldn’t waste the gas or drive time for that. Too many illiterate illegals cheering for more handouts. Yes, we have lots of illegals up here.

SKYFOX on August 5, 2009 at 2:10 PM

ICBM on August 5, 2009 at 1:47 PM

The OMB needs to be re-educated re-placed. Fixed it!

yoda on August 5, 2009 at 2:11 PM

The service sector acted stupidly.

lorien1973 on August 5, 2009 at 2:15 PM

I’m about fifteen miles away and I wouldn’t waste the gas or drive time for that. Too many illiterate illegals cheering for more handouts.
SKYFOX on August 5, 2009 at 2:10 PM

I gotta think Elkhart is in much the same boat as Michigan. Those with drive, ambition, and skills got out or are getting out. The remainder is diproportionatly made up of the retired, the very young, and the utterly unemployable. It was clear that the third group made up the bulk of the filthy liar’s audience today.

highhopes on August 5, 2009 at 2:17 PM

Hold on now, in a different thread dcwvu claimed that the economic indicators were all trending up,
Bishop on August 5, 2009 at 1:59 PM

For some, no longer in free-fall, is no different from, recovery is here.

MarkTheGreat on August 5, 2009 at 2:18 PM

If you go to a restaurant try to find out if your

waiter/waitress voted for Teh One and if so, conspicuously don’t leave a tip. Let them know you’re redistributing the money to someone more deserving, someone that didn’t contribute to the take down of the economy. Try to get as many Obama supporters laid off as possible. If anyone should suffer it should be them.

DerKrieger on August 5, 2009 at 2:09 PM

That downright mean and I beneath contempt. You should be ashamed of making such a suggestion.

DrW on August 5, 2009 at 2:18 PM

All of this hints at a higher unemployment rate, the figures for which will be released by the end of the week. If that number continues to rise, expect consumer confidence to decline and these numbers to get worse.

It will rise unless they gang rape the birth/death model “adjustment” again like they did last month.

KentAllard on August 5, 2009 at 2:19 PM

Ed, why do you always have to spout the bad news about the president and our economy. How ’bout the good stuff like, um, ah, hmmm,… oh forget it, we’re screwed :)

GrayDog on August 5, 2009 at 2:19 PM

To the younger generation; meet your Carter.

I think that the White House will do anything to sex up the statistics so that people can’t get a handle on what’s happening. 3/4ths of the jobs in America come from small business. Well, small business lives in fear of Obama so it’s frozen right now. This is not the time for expansion, this is the time for protecting assets and preparing for an Obama free economy. We survived Nixonomics and Carteromics so we will survive Obamanomics as well.

I’m glad we have some trolls here today. Stick around trolls, you will learn a lot from the wise council assembled.

Mojave Mark on August 5, 2009 at 2:19 PM

Hussein is in Elkhart Indiana today to tell the people that help is on the way. I wish I could be there in the audience…..

UltimateBob on August 5, 2009 at 1:39 PM

me too. except for the fact that I am standing in line for bread today I’d be soooo there.

jbh45 on August 5, 2009 at 2:22 PM

I’ve said this before, but it bears repeating: the Right’s satisfaction with pointing out deteriorating economic conditions makes me uncomfortable. It reminds me of how julilant the Left was when the Iraq war was spiraling into chaos.

It does us very little good to jump up and down with every snippet of bad economic news, shouting “We told you so!”.

If that’s all we’ve got, we’re gonna have nothing when and if an actual recovery happens.

Instead, we need a strong, understandable program and message which communicates to moderate/idependent voters the undeniable truth: that low taxes, smaller government and free-market principles make their lives better, while socialist policies make their lives more miserable.

guntotinglibertarian on August 5, 2009 at 2:32 PM

julilant

jubilant

guntotinglibertarian on August 5, 2009 at 2:32 PM

Ed, why do you always have to spout the bad news about the president and our economy. How ’bout the good stuff like, um, ah, hmmm,… oh forget it, we’re screwed :)

GrayDog on August 5, 2009 at 2:19 PM

Well, the good news is that the Russians have come to visit Obama, not the other way around…

right2bright on August 5, 2009 at 2:34 PM

Hey, can we agree on a new term to describe someone who seems to change their view to be less critical of Obama?

Oh, they’be been FLAGGED.

Sapwolf on August 5, 2009 at 2:37 PM

I’ve said this before, but it bears repeating: the Right’s satisfaction with pointing out deteriorating economic conditions makes me uncomfortable. It reminds me of how julilant the Left was when the Iraq war was spiraling into chaos.

It does us very little good to jump up and down with every snippet of bad economic news, shouting “We told you so!”.

If that’s all we’ve got, we’re gonna have nothing when and if an actual recovery happens.

Instead, we need a strong, understandable program and message which communicates to moderate/idependent voters the undeniable truth: that low taxes, smaller government and free-market principles make their lives better, while socialist policies make their lives more miserable.

guntotinglibertarian on August 5, 2009 at 2:32 PM

GTL, you have been obviously….

FLAGGED!

Sapwolf on August 5, 2009 at 2:39 PM

There will be no recovery until Obama and his band of thugs have been driven from power.

The private sector is being strangled to death right before our eyes, which is why government tax revenues are plummeting.

I see no sign of this changing any time soon.

Dave R. on August 5, 2009 at 2:41 PM

Peter Schiff is very smart, lucid, impressive.

If the people of Connecticut don’t choose him over GOP hacks and ultimately over Dodd, they’ll be proven to be utterly hopeless dolts.

guntotinglibertarian on August 5, 2009 at 2:41 PM

Manufacturing already got rid of jobs based on the lack of projected orders through next year. Service side will keep employees on until the existing inventory from last year’s manufacturing is gone, then they go out the door too.

Vashta.Nerada on August 5, 2009 at 2:41 PM

All of this hints at a higher unemployment rate, the figures for which will be released by the end of the week.

I’m still going with 11% by Christmas.

Vashta.Nerada on August 5, 2009 at 2:43 PM

There will be no recovery until Obama and his band of thugs have been driven from power.

The private sector is being strangled to death right before our eyes, which is why government tax revenues are plummeting.

I see no sign of this changing any time soon.

Dave R. on August 5, 2009 at 2:41 PM

You may be right. But that’s a slim reed. And certainly it doesn’t speak well of the GOP if that’s all they’ve got -the hope that things get worse and stay bad.

As that great political sage Billy Jeff Clinton once said, people won’t just vote against something; you’ve got to give them something to vote for.

guntotinglibertarian on August 5, 2009 at 2:43 PM

We need a new Contract with America. Here are some ideas:

1. Repeal the 16th Amendment
2. Limit Federal government spending to a set percentage of projected GDP.
3. End the War on Drugs. Ban “no-knock” assaults
4. Repeal Obama’s CAFÉ standards, which will cost lives.
5. Repeal any Obama healthcare measures
6. Repeal Cap and Trade legislation
7. Suspend immigration for 20 years
8. Complete the border fence
9. Mandatory 5 year sentence for employing illegal aliens
10. Ban welfare benefits for anyone other than US citizens
11. Require proper identification for voter registration and voting
12. Amend the Constitution to institute term limits for all Federal offices
13. Drill here, drill now
14. End subsidies for ethanol
15. Reform Social Security with private accounts
16. Bring home US troops from Germany, Korea and Kosovo
17. Abolish the Department of Education
18. Stop subsidizing Amtrak
19. Review all Federal legislation for compliance with the 10th Amendment; repeal any legislation which does not comply
20. Repeal Federal mandates which ban incandescent light bulbs
21. Repeal the Endangered Species Act
22. Fund a series of televised debates about climate change
23. Appoint a permanent office to investigate and prosecute political corruption
24. Ban the Fairness Doctrine
25. End affirmative action
26. Prohibit the Federal government from collecting and maintaining information regarding the race of citizens
27. End funding of ACORN
28. End Federal funding of universities which prohibit on-campus military recruiting and ROTC
29. Amend the Constitution to declare English as the official language
30. Require high-school graduates to pass a stringent US history examination as a requirement to receive Federal student loans
31. Repeal Federal hate-crimes statutes
32. Terminate all foreign aid
33. Withdraw from the United Nations
34. Provide robust funding to missile-defense systems
35. Amend the Constitution to require a 2/3 vote of Congress to raise taxes
36. Lower the corporate tax rate
37. Lower the capital-gains rate
38. Establish a Federal “thank our troops” holiday

guntotinglibertarian on August 5, 2009 at 2:46 PM

It does us very little good to jump up and down with every snippet of bad economic news, shouting “We told you so!”.

If that’s all we’ve got, we’re gonna have nothing when and if an actual recovery happens.

guntotinglibertarian on August 5, 2009 at 2:32 PM

A real recovery will not take place until the policies change, and that is not going to happen until liberals are voted out.

Vashta.Nerada on August 5, 2009 at 2:48 PM

Obama responds:

Ummm… But the stimulus… ummmm… errr…. TARP….Bush’s Fault… ummm… Present! Thank you and good night.

Wolftech on August 5, 2009 at 3:03 PM

guntotinglibertarian on August 5, 2009 at 2:46 PM

GTL,

Just vote in the Arctic Fox in 2012 and vote out the Dems in 2010. Then we can have town halls with the GOP and put their feet to the fire.

Sapwolf on August 5, 2009 at 3:05 PM

Just vote in the Arctic Fox in 2012 and vote out the Dems in 2010. Then we can have town halls with the GOP and put their feet to the fire.

Sapwolf on August 5, 2009 at 3:05 PM

Vote out the Dems based on what? “So you’re miserable now? Nyah, nyah, nyah, we told you so?”

Oh, maybe we should go with abortion and gay marriage again! Those won us the landslides of 2000, 2004, 2006 and 2008.

guntotinglibertarian on August 5, 2009 at 3:14 PM

I have just reported Ed and Allah to FLAG.

Long live the Emperor!

O, we long the day when he merges with Shai-Halud!

Nethicus on August 5, 2009 at 3:16 PM

What we need are some new regulations and taxes. Yeah that’s the ticket!

Oh and violate contract law to bring investors out of the wood work. All those guys would love to put their capital out on an even more risky venture.

Or we cold simply borrow/print 70% of the federal budget. I know that shows a turn around and would make treasuries a great investment.

jukin on August 5, 2009 at 3:26 PM

Raise your hand if think The One is trying to find a way to delay the release of the unemployment numbers.

Stephen Macklin on August 5, 2009 at 3:38 PM

GTL
We need to eliminate corporate income taxes because corporations don’t pay taxes. Any taxes they pay are just passed on to the consumers and we never know if they have also added a small or large percentage increase to go directly to the bottom line of the company. Capital gains tax should be eliminated as well so that investment money can circulate freely without having to stop and calculate what the tax effect will be if I sell this asset that has appreciated in value (largely due to inflation) and invest elsewhere.
You also forgot to state that we should eliminate Federal Funding for Planned Parenthood. They are not a non-profit organization as they make millions from all the abortions that they perform while saying that they support all options. Check the adoption statistics for Planned Parenthood and tell me if you honestly believe that with so few adoptions that they are fairly supporting that option.

TruthToBeTold on August 5, 2009 at 3:43 PM

“That beat analyst expectations, but also indicates that the growth (decrease) in manufacturing may (not) be petering out (as predicted)at the same time as the service sector contracts.”

burt on August 5, 2009 at 5:36 PM

“On the plus side, manufacturing rose (decreased) in June, but slower than it did in May.”

burt on August 5, 2009 at 5:41 PM

“Raise your hand if think The One is trying to find a way to delay the release of the unemployment numbers.”
Stephen Macklin on August 5, 2009

Did you count me yet? My arm is getting tired.

BobK on August 5, 2009 at 7:09 PM

I am always troubled by two statistics: the service sector accounts for 80% of our economy and consumer spending accounts for 70% of the GDP. How is the wealth produced that allow us to afford to based 80% of our economy transferring money from one another to pay for services performed. Where does the money come from to support this consumer spending?

I think that we are liquidating our accumulated wealth – eating our seed corn so to speak – and borrowing on top of that to maintain a style of living beyond our means. How can over a half century of running a trade be sustainable?

It strikes me that an economy based on a transfer of services and the buying rather than producing of goods is just another bubble waiting to pop.

Laurence on August 5, 2009 at 10:31 PM

The most funamental law of economics is as follows.
-
If production exceeds consumption, the excess causes an increase in the standard of living.
-
If consumption exceeds production, the deficit results
in a decrease in the standard of living.
-
Because of technology, a small percentage of the population
can be the engine of production.
-
For the last 30 years, America has been on a consumption binge. Living standerds have held up because we have been borrowing the excess production of other countries.
-
Eventually we will hit our credit limit and the loan will have to be paid off. Then we have to either generate a production surplus or suffer a drastic drop in living standards.
-
Wealth is created in only two ways, either by extracting valuable materials from the earth, or by manufacturing useable products from those raw materials.
-
Services may support wealth creation, but they do not directly create wealth.
-
Two barbers can cut each orthers hair until they starve to death.

esblowfeld on August 6, 2009 at 9:41 AM