Thursday, February 28, 2013

Sober Look: 55 straight months of job cuts in Spain's service sector

Sober Look: 55 straight months of job cuts in Spain's service sector

With Spain's recession deepening, the nation's service sector continues to struggle. Service industries such as hotels and restaurants are caught between rising input costs and falling output prices, as margins become compressed.
Markit: - The Spanish service sector ended the third quarter of 2012 deep in contraction territory. Moreover, September data signalled faster reductions in both activity and new orders as the economic crisis in Spain continued.Higher fuel costs contributed to an acceleration in input price inflation to its fastest since July 2011. On the other hand, companies continued to lower their output prices, despite a rise in the rate of VAT limiting the extent to which they were able to do this.

This can be an Iv-B economy based on credit, people in a bubble invested in Spanish real estate and unless the bubble reinflates this part of the market cannot regrow. A collapse without a potential for regrowth can be like a damaged building partially collapsing, then there are further collapses as parts of it give way later. It can also be like a plant that collapses partially in a storm so it is no longer viable, it then slowly dies as reserves are used up causing more collapses. In this case the V-Bi savings of people and the government might be used up waiting for a revival where there is no market. it is like a zombie economy or a patient on life support that cannot revive, resources are waste din keeping parts of the body alive though it does not have enough connections to move and sustain itself. In Aperiomics the economy needs to be analyzed not just with V-Bi statistics that only measure the stagnant or stable parts of an economy not the growing areas. the roots and branches of the economy need to be analyzed, a representative sample of these workers would be selected and then what business they connect to. Then the business those people connect to until long chains of business are mapped out to see if there are any breakages. If these weak links can be fixed then the Iv-B parts might revive, otherwise resources will just be wasted in keeping disconnected areas on welfare. Eventually this can lead to complete collapse into Roy as debts mount until they cannot be paid.

Source: Markit

Driven by sharp declines in demand, employment is Spain's services sector has been hit especially hard. This is the 55th straight month of service jobs losses.
Markit: - With workloads falling, service providers lowered their employment accordingly, extending the current sequence of job cuts to 55 months. The sharpest reduction in staffing levels was at Renting & Business Activities companies, while Hotels & Restaurants was the only sector to take on extra staff.

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