THIS COULD REALLY SUCK

(All Via Atrios)

A broad measure of the economy tumbles:

Service sector surprisingly weak in January
ISM index plunges to 41.9%, second lowest result on record
By Greg Robb, MarketWatch
Last update: 11:35 a.m. EST Feb. 5, 2008

WASHINGTON (MarketWatch) -- The non-manufacturing side of the U.S. economy, which had been the firmest pillar of the economic expansion, buckled in January, according to data reported Tuesday by the Institute for Supply Management.

The ISM non-manufacturing index fell to a reading of 41.9% last month, down from 54.4% in December. It was the lowest level since October 2001.

It was also the largest one-month drop in the index's history, coming in well below the 53.0% reading that had been expected by economists.

Moreover, it marked the first reading below the 50% mark since March 2003, and the second-lowest reading ever to boot.

Paul Krugman did a little homework and found that this index is a good predictor of employment. The vertical axis is the employment figure for the month AFTER the ISM index number is released, the horizontal axis is the ISM number.



Krugman also found that the index did a good job of tracking the last recession and it looks like were headed there again: