This Week's Herman Trend Alert

Leadership in Normal 2.0

  The Herman Trend Alert

May 28, 2008

The Economy and Job Creation, What's Really Happening

On a number of occasions, we have decried the fact that "bad news sells". In spite of the fact that the press wants us to believe that the economy is in very bad shape to sell media, the United States Commerce Department reported the US Gross Domestic Product (GDP) actually grew in the first quarter of 2008 at a rate of 0.6 percent.

While that level is not particularly impressive, the definition of recession is an economy with two consecutive quarters of decline in the GDP. Since the economy actually grew in the first quarter, the United States is NOT in a recession. America is certainly experiencing an economically stressed period associated with the theft, fraud, and corruption connected to the sub-prime debacle.

According to the US Bureau of Labor Statistics, non-farm payroll employment decreased in April by 20,000. Job losses continued in construction, manufacturing, and retail trade, while employment in healthcare, professional and technical services increased.

However, we must also add to the mix some good financial news: the ADP National Employment Report, released recently, stated non-farm private employment actually increased 10,000 from March to April 2008 on a seasonally adjusted basis. According to this report, employment in the service sector of the economy grew by 64,000 jobs, while employment in the manufacturing sector declined by 54,000 jobs. And the unemployment rate declined 0.5 percent.

Large businesses, those with 500 or more workers, saw employment turned down by 18,000, while medium-size companies, those between 50 and 499 workers declined by 14,000. Conversely and most importantly, employment among small-size businesses, those with fewer than 50 workers, grew by 42,000 during the same month.

The ADP report reflected the two hit hardest sectors of the economy by recent problems in mortgage markets have been residential construction (including those who sell to contractors and homeowners) and financial activities related to home sales and mortgage lending. The ADP report also indicated that employment in the financial activities sector advanced by 2,000 jobs for the month.

The moral of this story (to quote Gilbert & Sullivan): "Things are seldom what they seem."

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