Chapter 4 TSI as a Part of the Coincident Indicators System

With the increasing importance of the service-providing sectors, information from these sectors has become essential to the understanding of contemporary business cycles. Contribution of services to GDP during postwar recessions is clearly recorded inTable 4.1. On average, decline in real GDP during recessions would have been at least 70% more severe without the stabilization effect from services.Moore (1987)noted that the ability of the service sectors to create jobs has differentiated business cycles since the 1980s, and has led economy-wide recessions to be shorter and less severe. This is reflected as mild declines in employment of service sectors and its dominance in the total nonfarm employment, as plotted inFigure 4.1a. The growth in real GDP by major type of products obtained from National NIPA is depicted inFigure 4.1b. Since 1985, services never had a negative growth, which has muted the volatility in goods and structures, and resulted in more stable economy measured by total GDP (see also McConnell and Perez-Quiros, 2000).