Wednesday, November 25

Understanding Economics: Recessions Are Optional


On the day before Thanksgiving, the National Association for Business Economists predicted real growth in gross domestic product for 2010 would be 2.9 percent, up from its October forecast. The forecast is cautiously optimistic, even if the association anticipates the jobless rate might hold at around 10 percent through the second quarter of 2010.

While the estimates seem promising, and mirror other economic data, public sentiment remains stalled. Even among the readers of SmartBrief for CFOs, 42 percent of those surveyed predict the U.S. economy will not begin adding jobs until 2011 or later and almost seven percent wouldn't even hazard a guess.

So who is right? Economists? Employers? The general public?

While it might matter, its significance is about as important as knowing that the sun requires 226 million years to complete one galactic orbit or that our galaxy also moves up and down on a 62-million-year cycle, with biodiversity increasing and decreasing in relation to where we might be. Abundant biodiversity as well as planetary temperatures have historic relevance to our planet and how entire civilizations rise and decline. The people who measure this stuff are astronomers.

How outlook and communication play a critical role in experience.

My grandfather once told me a fable about a gas station attendant and two road-weary travelers looking for a new town to open a new business. While they arrived at different times, both asked the same question. Do you think this town would be a great place to start a business and settle down?

"I dunno," said the gas station attendant. "What was the last town you lived in like?"

The first man frowned: "It wasn't very good for business. The people were lazy, and genuinely unfriendly. Unemployment was high, people wanted to be paid too much, and the housing market had bottomed out. I can't say anything good about it."

"Oh," said the gas station attendant before leaning over to whisper. "You wouldn't like it here then. This town, it's exactly like that. You'd be much better off continuing on and finding a better place than this miserable place."

"Wow," said the man, smiling. "You sure saved me a big waste of time. Thank you."

When asked the same question, the second man smiled: "The people were optimistic, and genuinely friendly. Even in a tight economy, people were willing to work hard, appreciated our efforts in the community, and were generally optimistic about the future. If it wasn't for our expansion, we would have stayed there for years to come."

"Oh," said the gas station attendant. "You'll love it here. This town, it's exactly like that. You can continue on and look if you like, but mister, I think you just found yourself a new home."

"Wow," said the man, smiling. "You sure saved me a big waste of time. Thank you."

When people ask me about what I think about the economy and our outlook, I have two different answers because they are two different questions.

The big picture is pretty obvious, I tell them. As long as employers are waiting for consumers to spend more, and consumers are waiting for better employment, the best anyone can hope for is slow growth through the first two quarters for 2010. And for the most part, that is in line with most economic forecasts.

Our outlook, of course, is different. Since the recessionary pressures took hold, I have always said participation is optional. It is optional because we can either fret along with those best described as the 42 percent who now predict the U.S. economy will not begin adding jobs until 2011. Or, we could invest in finding the 17 percent who predict the U.S. economy will begin adding jobs in the first half of 2010. I'm interviewing my first hire for 2010 next week.

The same can be said for individuals. As much as I think Pat Olsen's post on How to Survive in an Unhappy Workplace might help some people, his third point is the most important of all. With the exception of abusive leadership, workplaces and cities and economies and galactic positions don't make you unhappy. Only you can do that.

It might be the day before Thanksgiving, but it's never too early to be grateful. Until tomorrow then.

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