Zane Safrit

Story of the Day: Economic Growth with Job Losses.

We are no doubt in a period of slow growth, it is growth nonetheless but it's very slow and it's had an impact on employment. - U.S. in Period of Slow Growth, Job Losses.

Our economy's becoming a mirror of those empty corporate, offshore financing, shells so popular with Enron, corporate banks, sub-prime lending, hedge funds. Dump the costs over there, the revenues over there, sell the shell to the public. The public is us.

What's being sold is the the economy's growing...and like investors in Enron's exotic scams or those unwitting dupes/investors who bought those packages of sub-prime mortgages, the ROI for the American worker isn't under our shell. It's under their shell.

Story of the Day: A non-sustainable economy

Milk, coffee, fresh fruit and bread were among the items that got more expensive by an average of 0.9 percent in April, the largest one-month increase since January 1990. Gasoline prices were up nearly 21 percent compared to a year ago.

Workers' wages, meanwhile, dropped for the seventh consecutive month. - In weak economy, foregoing $4 lattes.

These are the indicators of a non-sustainable economy. Wages down; prices up. At some point, there's no demand for consumer goods driving higher prices and our consumer-based economy stalls, then falls into tailspin. 

We're already seeing signs of this stalling as 'core' prices, everything consumable but food and fuel, rose only .2% in May.

Oddly, some people celebrated; some economists celebrated, too. They celebrated as if it's a victory of some sorts.

Prices aren't rising because there's no demand. The demand is eaten in their household budgets for food and fuel. Those are the non-core items. We should call them the 'cannibal' items. They're eating our economy.

The Economy's Impact on Our Lives

Pay cuts, not layoffs

From home-improvement contractors to waiters to salespeople, those who are paid at least in part with commissions, bonuses or tips have been battered by the slowdown.

4-day work weeks to save gas

Many [businesses and local-governments] are cutting back to four-day workweeks, with employees generally working four 10-hour days instead of five eight-hour days.

Discovering Mass-transit

More people are riding the nation's buses and trains, breaking records for the first quarter of the year. Transit operators expect the increase to be greater in the second quarter as gasoline prices soar.

"Core" Inflation Rises Only a Little Bit...

Consumer prices edged up slightly in April, but far more slowly than many economists had anticipated, the government reported Wednesday, lending credence to the view that a slowing economy is applying the brakes to inflation.

Wednesday’s report seemed to encourage investors on Wall Street, and the Dow Jones industrial average and the Standard & Poor’s 500-stock index were up about 1 percent.

Prices grew by 0.1 percent when food and energy are excluded — about half what most economists forecast — and 2.3 percent compared with the previous year.

This so-called “core” inflation rate is what the Fed tends to focus on as it adjusts interest rates, lowering them to spur economic activity and raising them when it fears rising prices.

“This is a fine inflation report if you don’t need to eat, drive or depend on your paycheck,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington and author of the recently released book, “Crunch: Why Do I Feel So Squeezed?” (Berrett-Koehler, 2008). Consumer Prices Rise, But Inflation Fears Ease by Peter S. Goodman

So...let's see if I understand all this.

Economists make decisions on interest-rates based on product prices for everything except food, energy and a job whose income enables the worker to buy all these other things, these core items.

The Labor Department and Wall Street celebrate when core prices rise slower than those pesky non-core things like ...food, fuel and jobs and income.

And...you're a labor-oriented economist if you connect the rising prices of food, fuel and the declining number of jobs with declining or slowly rising prices for everything that's left after you feed your family, pay for the gas to get to your job where your real income, with a job, will be slightly less this time next year.

Ok.

Another First for this Boom

“We have had expansions before where the bottom end didn’t do well,” said Lawrence F. Katz, a Harvard economist who studies the job market. “But we’ve never had an expansion in which the middle of income distribution had no wage growth.”

[T]he Pew Research Center asked people how they had done over the last five years. During that time, remember, the overall economy grew every year, often at a good pace.

Yet most respondents said they had either been stuck in place or fallen backward. Pew says this is the most downbeat short-term assessment of personal progress in almost a half century of polling. - For Many a Boom that Wasn't. NY Times.

This is the first time where a period of economic expansion resulted in a decline in income for the middle-class. Not sure how you drive a consumer-based economy with a decline in real income for that portion of your buying class that does the bulk of the buying. Just not sure how that works. Anyone?

Be narrow-minded, survive a recession

From John Jantsch at Duct Tape Marketing, Narrowly Fending Off a Recession.

The most effective strategy you can adopt now and in the future is to think narrow.

Narrow your target market focus - define who makes an ideal customer and who doesn’t - serve only one of them

Narrow your core marketing message - find a way to stand out to be different and build all of your lead activities around owning that difference, that word

Narrow the gap between you and your customer - build community around your current customers, bring them into your marketing mix, ask them what they think, give them something they didn’t expect, help them get more of what they want, call them for no reason at all - and build through their referrals

There. You read it from the master's own text. Narrow, narrow, narrow. It may be the one raison d'etre to be narrow-minded: success in fending off a recession.

5 reasons a recession is a good time to start a business

From Melissa Chang at Industry Standard comes a positive attitude with 5 valid reasons to support it:

Five reasons why a recession is a good time to start a company.

Link from Anita Campbell's Tweat on Twitter.

Handling Recessions: Tips and Perspectives

Now that the 'r' word can be spoken in polite company, even acknowledged it could be sitting in your living room, it's time to address it. Here's 2 posts that offer valuable perspective and actionable tips for small business to survive, or even (gasp!) thrive during these recessionary times.

Rhonda Abrams posts Grow Your Business In Spite of the Slowing Economy at USAToday.  It's a great article. Why? I like her positive attitude and I like that it's backed with data:

Despite the stagnant economy, nine out of ten small business owners see opportunities for their own companies, according to a just-released survey conducted for Intuit, maker of Quickbooks. More than three-fourths expect their business to grow in the coming year. This isn't just sunny optimism, either, because 65% of these small businesses have survived a recession before.

And then she goes on to list 10 Tips to be successful in a recession. Among them are:

Keep Marketing.

Target Big Corporations' Small Customers. Their small is your huge. Their cutting costs by not serving their small accounts means hello, opportunity, here you are for your company.

Hire Terrific Talent. My personal favorite. You're going to need great talent regardless of recession or expansion. Now's NOT the time to forgo your investing in your most important asset. At my former company, Conference Calls Unlimited, we survived and thrived with great talent.

There are plenty more in her post. And remember her advice:

Finally, stay positive. Remember, recessions are cyclical. Take advantage of opportunities now, so you'll be in a great position when the economy improves.

Yes ma'am. I will, you should, we all will and we'll get through this as we have in the past.

The 2nd perspective on handling recessions comes from my friend Mike McDerment, CEO at FreshBooks. His post is titled: Professional Health: Understanding Recessionary Pyschology and Dynamics.

It's the first in a series of post he'll publish on ways service-oriented businesses can survive and even thrive in a down-turn in the economy.  Given the recent announcement that job losses were greatest in manufacturing and construction...you may think this may prove to the only segment surviving. But not so. Here's Mike's thoughts:

Bear markets, recessions, bad times — they are (usually) preceded by good times, and it’s the good times where things begin to go bad.

Therefore when you think things are great, it’s precisely the time to start planning for the bad times.

To that, we both add...and vice versa. As Rhonda points out, now's the time to start planning and preparing you're a survivor for the....good times. As Mike points out, now's the time to start preparing for this round of change, the inevitable downturn in an economy. Why? Well, besides the obvoius point of your survival and your employees' welfare and your family's security...

never forget change is opportunity.

Change is always good. Change is opportunity. Denial...does it work for anyone? It's warm and comfortable, sometimes compared to uncertainty from change. But successful businesses much prefer the uncertainty of change to the certainty of their demise without it.

Thanks, Mike. Thanks, Rhonda.

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