We are at the halfway point in 2012 and it is not looking good for the world economy. The US jobs figures for the month of June came out on Friday and only 80,000 net new jobs were created in the whole of the US. The average increases for the last three months of 75k a month are nowhere near enough to get down a stubborn official unemployment rate of 8.2%. If you exclude the reductions in public sector employment, the private sector did little better. Indeed, goods producing industry jobs have declined in the last three months.
Readers of this blog will know that I like to look at a range of high-frequency activity indicators to judge where the world economy is going. First, I look at US index of the survey of corporate purchasing managers view of activity in their companies. I have combined the manufacturing and services ISM indexes, as they are called, into one composite index. This is what it shows for up to June 2012.
There is an even more frequent (weekly) index, but less reliable, that is compiled by a research company, ECRI, which takes a number of variables to try and measure US economic activity. The outcome for up to end-June looks like this.
And the US is in the best shape of the major capitalist economies, with real GDP growing at about 2% a year rate. In Europe, most economies are either flat or contracting, the exception being northern Europe. Japan too is crawling out of its tsunami and earthquake crisis. If we look at purchasing managers indices for all these major economies, this is what it looks like.
There has been much talk that China is heading for a hard landing. I have not thought so up to now (see my post, Which way for China?, 19 March 2012). But China’s goods producers reported an eighth successive month-on-month deterioration in operating conditions during June, as output, incoming new orders and employment continued to decrease. China’s composite PMI inched lower from 48.4 to 48.2 in June, a level indicative of a modest pace of deterioration in business conditions.
One firm conclusion is that world capitalism is still unable to restore sustained economic growth some four years after the Great Recession began. It is less clear whether it is heading back into a slump after its weak recovery from mid-2009. But the risks are rising.