US Recession Easing But Not Over: Survey

Source : The Business Times, July 21, 2009

Nearly 50% say sales have bottomed and hiring outlook is starting to improve

(WASHINGTON) The US recession's grip on the economy appears to be easing but likely has not yet ended, according to a survey of economists released yesterday.

The National Association for Business Economics' quarterly industry survey found that demand is stabilising, but a small majority of the 102 respondents said their firms had not yet seen the bottom.

The survey 'provides new evidence that the US recession is abating, but few signs of an immediate recovery', said Sara Johnson, managing director of global macroeconomics for IHS Global Insight, who helped analyse the report for the NABE.

'Industry demand was still declining in the second quarter of 2009, but the breadth of decline had narrowed considerably since late 2008, raising prospects for stabilisation in the second half' of the year, she said.

The net demand index dropped to -5 from the first quarter's -14. In the fourth quarter of last year it registered -28.

Of the four major sectors, financial services showed the strongest demand, with an index reading of +15. The transportation, utilities, information and communications sector had the lowest reading at -90.

The US recession, which dates to December 2007, is the longest since the Great Depression and the deepest in decades.

Most economists look for growth to return in the second half of the year, but they caution that the recovery is likely to be sluggish.

The survey found that profitability remained weak in the second quarter.

Almost half of US companies surveyed by NABE projected sales have already bottomed and their outlook on hiring is starting to improve.

Companies reporting declining profits outnumbered companies posting higher profits for the sixth straight quarter. However, the rate at which profits are shrinking is slowing.

There was wide dissension about whether or not the economy has hit bottom. Fifty-five per cent believe the low point has not yet been hit, with 14 per cent projecting their companies will see their lowest sales in 2010 or beyond. Forty-five per cent, however, said the worst was already over.

Thirty-six per cent of respondents said their companies cut jobs last quarter, while only 6 per cent of the firms added jobs - an all-time low for the 30-year-old survey.

Respondents expect job losses to slow and look for employment to finally turn higher later this year.

With unemployment at a 26-year high of 9.5 per cent in June, companies felt no pressure to boost paychecks, signalling consumer spending may be restrained. The survey's wage index dropped to minus 8, the lowest level since records began in 1982.

Employers across the US are trimming positions and delaying hiring even as reports show housing and manufacturing are stabilising. The economy has lost about 6.5 million jobs since the recession began in December 2007. President Barack Obama and economists surveyed by Bloomberg News say national unemployment will reach 10 per cent this year.

'No region of the US is immune,' said Rebecca Braeu, an economist at John Hancock Financial Services in Boston. 'The rising unemployment rate is clearly going to hurt consumption. It'll limit the recovery.'

Payrolls in the world's largest economy fell by 467,000 last month, more than forecast, while the jobless rate jumped to 9.5 per cent, the highest level in 26 years. The rate will reach 10 per cent by the year-end and average 9.8 per cent for 2010, according to the Bloomberg survey. -- Reuters, Bloomberg