What's your gutfeeling based on your business for the economic outlook of the next 12 months?

By: CRibeiraud 26 Votes Date: 01/31/2010 10:49:34

All the political Pundits, play the "Economist" game and make prophecies about the recovery of the US Economy, throwing percentages and numbers but not really explaining what might be behind those numbers.

The latest figures show that the US Economy grew last quarter again. That would the second consecutive quarterly growth. So technically, this would be the definition of the end of the Recession, right?

So what happens if the next 2 quarters are 2 consecutive declines? What if the economy shrinks from here on? Would that be THE 2010 Recession to rival with the 2008 Recession (which was conveniently dubbed as the worse since the "Great Depression", never mind that 1982 was much worse, with Inflation and interest rates reaching 20% and Unemployment over 14% back then) ?

Would this current Administration finally take ownership  of the "New 2010 rescession" since it put the "2008 recession squarely on the shoulders of the past one, yet taking credit for this so-called "Recovery"?

I think not. Most likely, if this truly is a recovery, Obama's team will claim the credit, if it is not, they simply switch the blame right back to Bush and continue on their merry way. What an ideal position for a politician, isn't it?

What if the growth had a bit to do with the Cash for clunker program in the penultimate quarter? But what of the last quarter then? Could it truly be consumer confidence that carried the day? Could it be that the US Dollar being so low, boosted the export advantage for US Goods Price wise? Maybe the X-Mas Shopping Season, maybe all of the above, who knows? Does it really matter?

All of this is truly relevant if it yields more orders in your books, leaves more cash in your balance sheet, more dollars in the Families pockets at the end of the month. Otherwise....

Now the opposition keeps trumpeting the Unemployment figures  as a fact that recovery is not on.... 

In full disclosure, if you were to assign me a political label, you could stick the "Conservative" sticker on my forehead and it would actually stick. That's who I am, but I am not an ideologue. In my humble opinion, unemployment figures can tell a series of tales, but in this particular economic climate, it tells more about the uncertainty employers feel about the future than about the current state of the Economy even in comparison to the recent past.

The economy may recover at this time, but if the future looks uncertain or bleak in the minds of the employers, particularly the SME (Small and Medium Enterprises), unemployment is likely to rise in the long term, whether those fears are factual or not, justified or not. Politics in this area are more influential than actual economic indicators.

If your business is doing much better this year, even if you already have a full year of orders for 2011, but you are fretting about Employment taxes, business taxes, Employee benefits additional fees...etc, you are more likely to NOT hire and pay your current Staff overtime in times of production need. What if 2012 or 2013 isn't as good, then what? What would you do with a much bigger staff? With the direction the government is taking with its policies in the work place, it might cost you more to let go of unneeded employees rather than to keep them. What if you don't have the work load to support that additional staff? What then? Chapter 11? Chapter 7?

Temporary tax credits for hiring is fine and dandy but what happens after that. The year after, and the one after that? Wil the tax hike then will over compensate for the current tax credit? Most likely. What if business is slower then?

Uncertainty of Government policies towards Mid-America is what will affect unemployment in the next 4 to 5 years. It is not always as relevant as it is now, but the current "Change" brought to Washington has resulted in the extreme uncertainty in the minds of everyone. In that sense, we live in the most unprecented era since Pre WWII.

There's nothing worse for business that uncertainty. If we know we're going down, we can plan for it. If we know we're going up, we can plan for it. Both it is difficult to plan effectively for both...

I know the old adage: Plan for the worst and hope for the best... but that only works in our minds, the problem in planning for the worst is that we usually underestimate the worst and overestimate the best.

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