No man is an island, entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less...any man's death diminishes me, because I am involved in mankind...
John Donne
My last article on the Ides of March has elicited some offline queries. One of the themes was that the collapse of the housing industry should not cause such a catastrophe that the US economy on the whole should be hit hard enough to cause a Red Friday.
Not being an economist provides me the liberty of looking at things from a simpler viewpoint. My retort to the gentleman was as follows.
Could you imagine all the primary and secondary industries connected with the housing industry? Do you know that the construction industry shed about 557,000 jobs from the period Sept 2006 to July 2008. My view is that if there is slump in construction it would lead to reduced demand for the following:
1. Cement Consumption reduced by 2.2% in 2007 and is expected to reduce by 10% in 2008.
2. Steel consumption domestically is seeing reduction in demand as 30% consumption is for the construction industry and 20% for the auto industry.
3. Similarly requirements for fittings, fixtures, electrical items, plumbing, are some of the other areas to be hit causing job losses for plumbers, electricians, transporters etc.
Some of the statistics as per Bureau of Labor Statistics, US dept. of labor give the following details:
1. Employment in retail trade lost 211,000 jobs since March 2007
2. Motor vehicle and parts dealers saw a decline of 35,000 jobs since January 2008.
3. Temporary help services has seen a decline by 185,000 jobs since Jan 2008.
The one industry which has seen huge increase in demand for manpower is the mining industry which includes oil and gas.
Overall there has been a loss of 463,000 jobs in calendar year 2008 as of July 2008.
Therefore the decline in basic industries like Housing and the auto sector would not be causing limited damage but damage across the economy. Not only is there less money to spend, there is a negative belief as well which would lead people to put of purchases. Therefore John Donne’s statement is apt, that things do not happen in isolation, we are all interconnected. While the Friday after Thanksgiving may not be such a catastrophe, it would definitely bring no cheer.
John Donne
My last article on the Ides of March has elicited some offline queries. One of the themes was that the collapse of the housing industry should not cause such a catastrophe that the US economy on the whole should be hit hard enough to cause a Red Friday.
Not being an economist provides me the liberty of looking at things from a simpler viewpoint. My retort to the gentleman was as follows.
Could you imagine all the primary and secondary industries connected with the housing industry? Do you know that the construction industry shed about 557,000 jobs from the period Sept 2006 to July 2008. My view is that if there is slump in construction it would lead to reduced demand for the following:
1. Cement Consumption reduced by 2.2% in 2007 and is expected to reduce by 10% in 2008.
2. Steel consumption domestically is seeing reduction in demand as 30% consumption is for the construction industry and 20% for the auto industry.
3. Similarly requirements for fittings, fixtures, electrical items, plumbing, are some of the other areas to be hit causing job losses for plumbers, electricians, transporters etc.
Some of the statistics as per Bureau of Labor Statistics, US dept. of labor give the following details:
1. Employment in retail trade lost 211,000 jobs since March 2007
2. Motor vehicle and parts dealers saw a decline of 35,000 jobs since January 2008.
3. Temporary help services has seen a decline by 185,000 jobs since Jan 2008.
The one industry which has seen huge increase in demand for manpower is the mining industry which includes oil and gas.
Overall there has been a loss of 463,000 jobs in calendar year 2008 as of July 2008.
Therefore the decline in basic industries like Housing and the auto sector would not be causing limited damage but damage across the economy. Not only is there less money to spend, there is a negative belief as well which would lead people to put of purchases. Therefore John Donne’s statement is apt, that things do not happen in isolation, we are all interconnected. While the Friday after Thanksgiving may not be such a catastrophe, it would definitely bring no cheer.
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