Service sector in US facing slow down
February 11, 2008
As per the reports that have come from New York on the sixth of February, the US economy is not at all in a position to avert a recession in its service sector. Even the smallest sliver of hope had diminished by the end of Tuesday that the country might avoid the slowdown. This is the first time that it is happening in the last five years. The news turned out to be a harsh one for many investors who were starting to believe that Federal Reserve would come with something to find a way out of the worst potential slowdown that has happened since 1991. The seriousness of the situation can be understood from the fact that Dow Jones industrial average lost 370 point in one day which was the biggest drop that took place since August. The result was a massive tumble of stocks and points.
What most people are concerned about is not whether or not there would be a recession, but about how bad the recession is going to be. What even the optimist find hard to digest is the fact that the numbers are almost terrible and beyond belief. The talk has been only about this says Scott Anderson a senior economist working at the Wells Fargo & Co; whether or not the recession is going to be a mild one or a severe one. The true nature of what is to be expected can be derived from the reading from the Institute of Supply Management which said “what is in store was going to be as big a shock as you can probably get”. According to Mr. Anderson, the month of January might be known in the future as the month which was the official start of one of the biggest recessions in the near past.
Many companies in the country are now filing for bankruptcy and are saying that they fell victims the recent slide in the housing market as well as their own debt load. Many other companies and shops are now cutting down on their employees and are not recruiting anymore. Other companies and commercial establishments are also employing such measures cut down on their loss. Some of the measures employed are slashing its 2007 earnings guidance. There are companies in the country which eliminated 28,000 jobs in the month of January alone and 269,000 jobs in the last 12 months. 17,000 was the total number of jobs the economy alone lost and this was the first country wide loss of jobs since the august of 2003. Another part of the service sector which has been hit badly is the financial services industry. It was very badly struck by the decreasing home prices, mortgage defaults, and the devaluation of other mortgage backed investments. The other people who find themselves in trouble are the banks, mortgage lenders, and the brokers.
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