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If data and numbers can be trusted, then it is possible that the US recession may have seen its bottom in November-December of last year. A new report released by the Institute of Supply Management suggests that US non-manufacturing sector contracted at a slower pace in January. The Institute’s index for non-manufacturing activity was at 42.9 in January, up from 40.1 in December. Its non manufacturing business index was up from 38.9 in December to 44.2 in January. The improvement in these indexes suggests that the pace of contraction has reduced. The index for new orders was also up from 38.9 to 41.6. Though the improvement may be marginal, it suggests that things may be turning around. Another key index that was encouraging was the inventory change sub index, which shrunk to 41.5 from 49.0 suggesting that pick up in business activity was leading to reduction in inventories. Other consumer confidence indexes were also marginally better and if lady luck is with the US, the recession may have hit the inflexion point.

However, as long as the key indexes are at a sub 50 level, the economy is in the contraction mode. However, the economy will back in the expansionary mode only when, these indexes cross the 50 mark.  While, some of the indexes may be suggestive of the US recession having bottomed out, unemployment continues to increase. The employment index fell to 34.4 from 34.5 reflecting a deteriorating condition on the jobs front. It is likely that unemployment may continue to rise for some time as usually employment lags the economic cycle. Accordingly, jobs lost for January are expected to be over 520,000 and the trend is likely to extend into February. The inflexion point for unemployment could be just a few months away, if the economy continues on its turnaround course. Latest figures as per the ADP National Employment Report confirm that the job loss in January was 522,000 for the US non-farm sector. The breakup of jobs lost by sector, as per the report, is as follow:

Sector of Economy

Jobs lost in January 2009

Small businesses


Medium businesses


Large businesses


Total number of jobs lost



Thus, while some of the dark clouds hounding the US economy seem to be fading, others continue to cast their dark shadow. However, as per the adage that every cloud has a silver lining, the dark cloud of recession seems to have had a positive impact on productivity. US companies, in their attempt to contain losses seem to have managed to squeeze more output out of the employees they did not retrench. Employee productivity was up by 1.5% in the last quarter of 2008 on the back of a 1.3% gain in the previous three months. This is a welcome development and will add to the long term competitiveness of the US economy and give reason to the US dollar to maintain its strength.