Let’s start a new trend this week as we have reached a tipping point. The same kind of tipping point in which Malcolm Gladwell described so vividly in his book on the topic. That tipping point is going to start with everyone waking up tomorrow, looking in the mirror, and saying “the economy is ok” and for the remainder of the day, you quell anyone saying otherwise.
You don’t have to say that the economy is great, amazing or that the boom times are here! Just say, it’s actually OK. Can we, for just one day, not talk about a “recession” even if we can only enjoy it for 24 hours?
You may say this, and the economy may go to hell the next day, it’s possible. We could be in a full blown recession by the end of the year with several quarters of contraction, and knowing that, you should still wake up tomorrow and say, “the economy is ok.”
Let that one day of positivity lead to a new idea, maybe a new way of doing something, either way, use that energy to move forward. Not taking action because you’re worried about tomorrow may cost you more than taking action (what’s the old saying, more is lost in indecision than the wrong decision?)
Why Should I?
Because as of today, the economy is ok and it has been for a couple years. We have our office full of TV’s that run news stories all day about the markets and business in general. Since 2008, people cannot stop talking about the next recession. Back in 2009-2010, all the rage was about a double dip recession, how it would be far worse than what we have already experienced, and it would drag us deeper in the hole for the next 5-10 years….. Well, yeah, it didn’t happen.
And as we stomped our way down to 4.9% unemployment, through 2010, 2011, 2012, 2013, 2014, 2015 and now 2016, 6+ years later, you keep hearing about the looming recession. You hear it from economists, from journalists, Wall Street analysts, and everyone else that is still healing from the mental scars of 2008-2009.
The big trend seems to be “I want to make a prediction and when it comes true, I can claim to be an expert, a real clairvoyant” in which they will ride out every dollar they can make off of it until they make a bunch of wrong predictions.
Which is kind of ridiculous, because saying a recession is coming is like predicting the sun will rise tomorrow. Another recession will come, they always do, in all different shapes and sizes, but we cannot fear that. And we really have no idea what our new economy looks like. With technology, industrial automation, robots, and our economy being nearly all services-based, we won’t understand today’s economy until it’s been studied for years, so maybe by 2030, we will understand how the new economy worked in the early 2000’s. Maybe our new world recession is seeing a 1-2% increase in unemployment, maybe we will be stuck at 1.5 to 2% GDP forever as our country is fairly established, at least until the next big thing comes.
Let’s face it, the American consumer likes to spend, we like new cars, new homes, eating out, bigger TV’s, and hell, you cannot wait a full 2 years for a new mobile phone. In fact, you would like that new piece of technology every 12 months!
You really can’t hold this country down, even in 3 feet of mud we keep picking our knees up, trudging forward. Even if we’re slow, we keep moving, we don’t stop, not even for a gawker delay.
Recession doesn’t mean complete financial system collapse like we experienced in 2008; that was a completely different animal. Can or will a collapse like that happen again? Well, sure! But we went from 10% unemployment to 4.9%, so it’s likely in the next 12-24 months we will see some contraction, maybe to 6.5% unemployment, maybe less, maybe more, and then we will get back to business and it will drop again. We cannot go in a straight line forever, progress has ups and some downs before we keep going up.
Here is what we see and hear
• Our manufacturing clients have called us to fill more roles in the last 45 days than we have seen in any other period last year. They note a shortage of talent and with the boomers retiring, it is only making the talent gap worse. Some say hire, then put it on hold. Then they say hire, put it on hold, then back to hire. Their customer demand says they need to hire, but depending on the news that day about oil and the stock market, they may change their mind.
• Looking at our client base across all of our brands with a clientele base ranging from retail to manufacturing to real estate, many still see growth in 2016, even if it’s not massive growth.
• Many clients are sitting on invoices for 60-90-100+ days because they used a lot of their capital to grow in the last 60 months. They were running lean from 2007-2010 and as the economy picked up, they had to make capital expenditures and add headcount again. Many want to grow more but cashflow is an issue. That cashflow isn’t because of the lack of sales, it’s because of too much growth too fast. Credit to businesses may be an issue if the commercial lending tightens up more. Credit to businesses is going to be imperative in the next 24 months.
• With everyone’s cashflow being on the tight side, that is limiting hiring, wage growth, and more capital expenditures. You cannot grow your business or hand out raises if your clients are not paying their bills, because their clients are not paying their bills. This causes a ripple effect all the way down the supply chain.
• Looking way downstream at some of the initial suppliers to manufacturing companies, we get reports that they have quoted a lot of major projects and programs that may be launched this year. They see it as the first half of 2016 being so-so and the last half picking up.
And these issues below are slowing us down
• Many business owners of all sizes note the issue with oil prices and nearly everyone will say, if we can just stabilize at $40-60 a barrel, everyone will basically shut-up and get back to business.
• Companies are not happy with the current political outlook. Not many people like the field of candidates and with this election being far from normal, everyone is going to be on edge until the election is over. Then you say ok, it is what it is, let’s keep moving.
• The sketchy start to the year for the stock market has planted some doubt for many businesses. While election years are typically good for the market, and it’s possible that the market can be down and the economy be up, there is still some doubt being held by businesses. When the stock market levels out a bit, we can still see more positivity coming.
• Ongoing geopolitical issues keep uncertainty high, but does that ever go away? Businesses were shy about being aggressive back when Greece had all their issues, and now it’s Britain and the EU. In reality, there will always be something going on somewhere. The global economic outlook for 2015 wasn’t so great and we are seeing signs that it may be better for 2016. Emerging economies, some in collapse, some on the mend, will hopefully lead to stabilized growth. China may be leveling out, and other central banks have launched negative rates that may have some positive effect on the overall outlook, but the global economy as a whole remains an issue.
Want some positive news?
• As noted, we are at 4.9% unemployment. Yeah yeah, you cannot say that without someone saying “you can’t trust those numbers, it doesn’t count the underemployed and those that stopped looking” and we can say, “fair enough.” Then we say, if you stopped looking for the last 5 years, maybe you’re not a part of the workforce anymore. And if you’re underemployed, please contact JMJ Phillip, Employment BOOST, or anyone one of our other dozen companies, because most of our clients are hurting for good people.
• It won’t be long before we approach 2 million people graduating with a 4 year degree, every year, soon. Our workforce is educated, we can do something with that!
• Oh yeah, back to those not seeking work anymore. In my 25 minute drive to the office (Metro Detroit Area), I counted 22 places with hiring signs a couple weeks ago. The most I have seen since, 2004-2005 maybe? While many may not be high paying, many business owners need people! There is money to be made if you want to make it. Talk to a small business owner and they are likely to tell you that they are looking forward to summer so that they can pick up some workers home from school.
• Hiring demand continues to tick up for most of our clients across the country.
• Every time you hear bad news about manufacturing, 4 weeks later, there is another news article talking about how manufacturing jobs are soaring. Ups and downs again, which is normal.
• Consumer sentiment report put out by the University of Michigan shows some recovery over the last 6 months.
• Automotive sales in 2015 hit an all time record.
• Mortgage rates have dropped even after the Feds 25 basis point rise and the new home industry predicts more growth to go along with that.
• We are seeing organic wage growth in the tight talent markets for manufacturing professionals, engineers, technology professions, and the all encompassing supply chain vertical.
• Durable goods orders surged in January
• Economy was stronger in the 4th Quarter 2015 than previously believed
• US companies are holding over $2 Trillion Dollars in cash, and while many note this as a negative, there are some positives. In bad times, those with capital reserves add stability to the market which is something that is often greatly undervalued. Five of the top 10 companies with the greatest savings are technology companies where often the capital investment for new products isn’t as heavy as something like automotive. Although, General Motors is hanging on to the number 10 spot on that list.
Someone can likely write an article just like this with the same amount of information, but showing why we are not in good shape. We will never be in perfect shape and there will never be an immaculate economy. But, it is time to stop talking about recession all the time even if we are in one. If you keep saying something enough, you just may get what you wished for and I doubt that no one, minus the short sellers, is wishing for a recession.
As I prefer to be a realist, I don’t want to deny some underlying issues with the economy, we have some bumpy roads ahead. But the nonstop talk of a recession can also have a negative effect on business and the economy.
Can we just say that we recovered pretty well since 2008 and that it’s not a crime to say that? Even if we are in a recession the next quarter, we have to be able to say in the prior 6 years that we were OK, that we went from complete disaster to a decent recovery. While we still have a long way to go, and we have many bumps along this road still, in the next 10 years we can have a great economy that is resilient to many of those bumps.
So for one day let’s remove the word “recession” from our vocabulary and use that brain time to be creative, develop or hone a new idea or strategy, and figure out how we can take 3 steps forward instead of worrying about taking any steps at all.
When adverse times hit, you cannot roll up in a ball and hide, that is usually the best time to strike.
Let’s keep our heads down, work hard, and do business like America always has.