The Need for Counter Cyclical Measures in a Falling Economy: Another Picture of Unemployment
Many journalists, when writing about the economy, focus on the broadest pictures: Gross National Product, total Non-farm employment, etc. But, sometimes the big picture needs supplementing with a narrower focus.
In looking at employment, for example, it helps to break the total employment picture down into three primary sectors.
- Cyclical Services, which include information services, fire, professional and business services plus leisure and hospitality (sports, hotels, gambling, e.g.), Employment in this sector follows the general business cycle.
- Acyclical Services, which include health, education, other services, and government. These services, as the name implies, do not vary with the business cycle as much as the other sectors.
- Goods, i.e., produced goods, which are generally measured with industrial production figures.
Below is a graph of these three sectors, measured in total payrolls for each sector as annualized six-month changes. This chart shows how wide a path unemployment is cutting through our economy. Most everyone is feeling it.
The chart is also a good explanation why government spending is so important in acting as a counter cyclical component for our economy. While the private payrolls expressed in the cyclical and manufacturing sectors are zigging, government spending and payrolls can zag. This approach to leveling the effects of business cycles has keep recessions at a more moderate level since the Great Depression of the 1930s.
