Wednesday, December 03, 2008
The Institute for Supply Management reported that activity in the nation's service sector dropped to the lowest level on record, going back more than 11 years.
As shown above, last month's plunge, from 44.4 percent in October to 37.3 percent in November, exceeded the late-2001 retrenchment following the September terrorist attacks. Recall that readings above and below 50 indicate expansion and contraction, respectively.
The decline was broad-based but the most important sectors had the sharpest contractions. Employment fell from 41.5 to 31.3, new orders dropped from 44.0 to 35.4, and new export orders, an area that had been strong throughout the year, plunged from 50.0 to 34.5. As expected due to slowing economies around the world and the stronger dollar, the U.S. export industry is now undergoing its sharpest contraction in recent history.