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Thursday, July 17, 2008

Slow Economy Facts and How to Help Your Staff

If someone were to ask me what I really believe in and know to be true, along with the Father, Son, Holy Spirit, Communion of the Saints, and the power of prayer I would list The Business Cycle. Anybody whose been in business for long has seen it for themselves and heard the age-old phrase, "What comes up must go down". The fact that "everybody knows that" however, is an assumption we can't make because a lot of your young staffers have never seen a down cycle. They hear the hystrionics of the mass media and believe we're all going to die broke, and very soon. Here are some facts to help you and your staff through the trough and back up to the inevitable peak.

Take a good macroeconomics course and you'll hear that full employment in this country is an unemployment rate of 4 - 4.5%. That's because, historically, about that percentage of the U.S. population is in transition at any given time. By transition I mean just coming out of college, just quit their job to go back to college, quit one job but hasn't yet started an already-secured successor job, left the workforce to have children, just became and empty nester and now trying to get back into the workforce, etc... This time last year the unemployment rate for metro Nashville was 3.7%, which explains all those "Help Wanted" signs you saw around town. This year we're up to (Gasp!) about 5%. On a population base of 625,000 (nearest estimate I can find on-line) the difference between 4.5% and 5% unemployment is 3,125 people out of work who want to work. In other words, the sky is not exactly falling no matter what you see on the 6:00 news. And, oh yeah, you still see help wanted signs around town.

A recession has a technical definition; two consecutive quarters of negative economic growth. To date, in 2007 and so far in 2008, we have yet to have even one quarter of negative growth. What you see and what you're feeling in the local economy, with light traffic and half-empty restaurants (and book stores), is a slow-down but not negative momentum. The slow down is more the product of anxiety and higher energy prices, but its not an economy going backwards. Think of it this way; the same amount of money is flowing through the local economy; its just that a much larger percentage is being spent at the pump at the expense of restaurants, book stores, etc... The jobs, and aggregate income, are still here and the depths of the slow-down, or whether it becomes a real recession, will depend upon how quickly people find ways to use less gasoline and reclaim those dollars for their other spending. There's hopeful signs of this today, as the price of oil is down $14 in three days over increased U.S. petroleum inventory. Its a sign that people are finding ways to use less due to the high cost.

It Depends on Your Age
The last mild recession we had in this country was the post-9/11 recession of 2002. Assuming that you were 23 when you entered the workforce (a Freshman at 18 and 5 years to graduate and find your first job), that means that anybody on your staff who is 28 or under was not in the workforce when we last had a slow economy. That recession was mild compared to the Jimmy Carter recession of 1981/82. Using the same age assumptions, that means that nobody on your staff under 47 has been in the workforce during a prolonged recession. The Reagan/Clinton/G.H.W. Bush economies were so good over such a long period of time, that you have people in your work groups right now that are seeing recessionary signs for the first time in their working lives.

This makes it incumbent on those of us who've lived through this all before to help educate, reassure, and encourage those who haven't. This doesn't mean being Mary Sunshine and telling them that everything is going to be alright; things could get worse before they get better and job loss in such times is always a possibility. The encouragement, though, is that things do get better and history proves this to be the case. The best remedy for job anxiety at times like these is to look for ways to save money, both personally and professionally, and for new ways to add value. Stepping into the challenges with courage distinguishes those who do and helps make careers; sitting around a dark office talking about how bad things are neither shows courage nor adds value.

Oh yeah, and one more thing; turn off the TV until after the election. You're not going to die broke anytime soon.


Ron Edmondson said...

This is a good post. I wish the news sources would pick it up! I've been "preaching" this too. We are going to have a much better economy when all this is over.

Colleen Coble said...

This was a great post, Jim! Thanks for bringing some perspective. I'm old enough to have lived through all of them you mentioned. Shh!

Lawrence Salberg said...

Glad to see someone not jumping on the recession bandwagon of doom and gloom.

Still, if we don't get gas back down to $1.25/gallon where it belongs we little guys are in big trouble.

CFL's aren't enough to save us (I switched over a year ago). They are great, but we need to bring the Thunder to OPEC and Venezuela and tell them, "thanks, but no thanks, we gotz oil". And then turn around and sell the excess to their customers. Hit 'em and hit 'em hard.

Steve said...

I agree with everything you say but I do think we are yet to understand the rising costs of fuel and natural gas on the economy. The most under-reported story of the year is the huge increase in the cost of natural gas. I belief it will dwarf the car fuel issue in its impact on our economy. When the average family realizes they will have to pay $500-1000 per month just to heat their home in the middle of the holiday season we may have a whole new blog post for you.

Jim Thomason said...

Good point Steve. I'm hopeful that Americans, in that event, will become as creative about natural gas conservation as we've gotten (finally!) about oil consumption. Who knows, there may be a storm window manufacturer or wood burning stove company out there that's about to have a banner year!