Service Fatigue

This chart provides the Employment in Services as percentage
of Total Employment.

I have commented in the past that this preponderance of jobs in
one sector represents an economic peril and that I believe that
this number will decline in the future.


The chart above shows Real Services Consumption as percent of
Real GDP. Red arrows indicate recessions.

The trend, in the past few decades, has been clearly up.

Note curiously, how on every recessions, a spike in Services
relative to GDP took place. Also, the spike reached a higher
level each time, except for the last recession in 2001.

This suggests that the momentum in Services is showing metal
fatigue.

Metal fatigue is a cause of structural damage that occurs in
planes and bridges. Unfortunately, it is very hard to detect until
is corroborated by failure of morphology or design.

There is little evidence now for a transformation in our Service
Economy, but one could look for clues as in the chart above, or
think of changes taking place in different industries.


The chart above is similar to the first one, but uses Industrial
Production in the denominator instead of GDP.

Note that the spikes are clearly visible.

Industrial production is reported monthly, so it provides more
timely information than GDP(quarterly) if we want to use it in
the future.


This chart shows Industrial Production(IP) plotted against the
IP:Business Equipment relative to IP and for the IP:Consumer
Goods relative to IP.

Note the flat line for Consumer Goods(yellow) vs. the vigorous
performance of Business Equipment(pink).

Considering this country as purely a consumption society is
not valid.

The US has proven incredibly creative in developing new
industries and it is typically at the vanguard.

The search for energy alternatives to oil, is a good example
of changes which will have a positive contribution to the US
economy and provide a shift away from services.

This shift will be a net positive for the economy, but the sheer
number of jobs lost in Services may contribute to a very
difficult transition.