Tag Archives: economy

Economic recession forces positive attitude to see opportunities

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There is a great article from Geoff Ramsey-CEO, Co-Founder of eMarketer on how it’s important to stay balanced during these difficult times. In it he mentions five key ways to keep on track and avoid seeing every article or news report as additional evidence that we are heading towards an inescapable catastrophe.

  1. Understand Your Locus of Control
  2. Tighten the Spigot
  3. Focus on the Opportunities
  4. Leverage Data to Construct Opportunistic Experiments
  5. Invest in the Future

What is interesting is that these five ways pretty much mirror in sequence how people deal with other stressful situations in their lives. I believe we are still in the early part of this sequence as business owners and consumers try to make sense of all the statistics and negative news which bombards them every day.

But the critical element in this sequence is moving beyond the paralyzing fear which has gripped the markets and realizing that this will turn around and everyone out there has an opportunity to creatively reshape how we do business. I was at a great talk at the University of Toronto’s Rotman School of business last night and the speaker Geoffrey Helt reiterated that we are in a transformation right now and as painful as this is at the moment (especially with everything else going on in the economy) will result in new models and ways of conducting business.

We can help to get past this by decreasing the flow of negative news (#2) and promoting the opportunities (#3) inherent in this shift. Turning down the volume allows you to refocus that energy and hear emergent trends in the marketplace.

Finally leveraging data and investing in the future gives you a starting point for investigating how to move ahead. Just remember to balance what is coming in with a grounded sense that standing still won’t work for long; the agile competitors are already looking at opportunities and trying things to carve out a path to new revenue sources and better customer experiences.

Economic stimulus packages might not work out as planned

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With the rush to pass the stimulus packages in various countries, politicians are repeatedly stressing the seriousness of the recession to spur various levels of government into action.
The problem with this is that the more politicians use adjectives like grim and unprecedented and draw comparisons to the great depression the less consumers spend and the worse consumer sentiment gets. This affects how business thinks about investing how consumers shop for goods and ripples up through the economy to prolong and perhaps accelerate the situation.
So in order to push through stimulus packages to fix the economy they may actually be hurting it in the long-run. This is most evident in the consumer sentiment index, which, although marginally higher in January still reflects consumers ongoing fear about the direction of the economy. Consumers now,

” anticipate the deepest and longest recession in the post-World War II era, but consumers do not expect the economy to sink into a 1930s-style depression…”

But in the face of unsettling jobs numbers, consumers are still unsure of the direction of the economy and are looking for direction that there is hope on the horizon. That hope may come in the form of a stimulus package, but we must still keep in mind that comparisons of these current conditions with the Great Depression will not help to spur confidence that government spending will help the situation.

In an analysis of Friday’s jobs report Globe reporter Barrie McKenna cites a University of Michigan professor that notes even though the job losses are large, they more accurately compare with the early 90s recession, not even the recession of the 80s. The reason says Mark Perry is that even though the raw numbers appear unprecedented, in the 1980s there were only about 93 million Americans working in the labor force versus approximately 154 million today. So on a percentage basis there is a distinct difference and a real danger of using raw numbers out of context for other purposes.

What all this comes down to is that as Professor Perry states:

“We’re talking ourselves into a more severe recession than this really is,” he said. “A lot of this is psychological, and that plays into consumer spending.”

But with the pace of job cuts accelerating, market watchers expect that next month’s jobs report will be even worse. One final thing to keep in mind is that these stats tend to be trailing indicators of how the economy was doing. That being said, any commentary on these upcoming numbers has to be framed judiciously so as not to choke off consumers and businesses willingness to spend.