Chief Executive Boards Blog: The First Obama Christmas, Per the Wall Street Journal

Wall Street Journal, Saturday, November 28, 2009:

"In this, the first Obama Christmas, the nation finds itself tentative, apprehensive, uncharacteristically indecisive."

That sentence pretty much sums up the attitude of many business owners this season. The prolonged duration of this recession seems to have worn down even the most resilient of entrepreneurs.

It's time, however, to recalibrate our attitudes. Brian Wesbury, author of It's Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive, calls what we've just been through "The Panic of 2008". He argues that this recession was entirely the result of an artificially-induced undermining of financial assets, created by Government intervention in free markets. Those actions, according to Wesbury, led to the Lehman collapse, the first domino in The Panic of 2008.

Wesbury makes the argument that the Federal Reserve's current "loose money" policy has recently been and will continue to be the primary propulsion for economic growth -- until the Fed throttles back the money supply

While opinions differ on economic theory, I believe Wesbury is right in one respect -- that the economy is indeed growing and it's time to step it up -- to invest in your business, expanding your customer base, and getting back into growth mode. If you get the jump on your competitors, it could take them years to catch up. Those who remain tentative and hunkered down may fulfill their own prophecies.

You may also want to consider hiring some extra help while it's available. Unprecedented gains in productivity (units of output vs. hours of input) suggest that perhaps companies "over-fired" -- trimmed themselves back to unsustainably tight levels of staffing. If that results in a bounce of hiring demand, you may find all the good candidates scooped up by others.

Disturbingly, the National Federation of Independent Business said on Dec. 3 that a monthly survey of its small business members showed that more companies plan to reduce employment in the next three months than plan to add jobs. I say disturbingly, because I'm convinced those respondents are going to find themselves behind the power curve -- perhaps never to recover. I know of few CEBI members still contemplating staff reductions -- most have returned to normal work weeks, recalled some laid off workers, etc. These are, of course, business owners who have the benefit of more "forward radar" through their peers in other CEBI companies.

Now, here's something to think about. The world is continuing a shift from an industrial economy to a knowledge economy, just as Alvin & Heidi Toffler predicted in their book Revolutionary Wealth. Many of the manufacturing jobs lost during this recession will never be back -- those companies will figure out how to replace those hands with mechanization and knowledge (just as they've been doing for 200 years). Since those jobs will never be back, the future for undereducated, technology-challenged workers is worse than ever. So be ready for months of bad news on the jobs front -- I believe we're again going to be raising the ratio of "unemployable" workers in the US economy.

Finally, be careful of how much you buy into unemployment statistics. Perhaps half of those presently out of work lost jobs that will never be back due to permanent changes in the world economy, and the continuing decline of the number of workers needed to produce a unit of output. Those jobs are not coming back, and the re-employability of those people will take time while they come to that realization and re-tool themselves (or decide to settle for a lot less). This process isn't pretty, and, yes, it was accelerated by The Panic of 2008.

So for ourselves as business owners, let's shake off the remaining negative economic indicator -- unemployment. It's time to get out of "tentative, apprehensive and uncharacteristically indecisive" mode. Let's start playing to win vs. playing to decide. If you're looking for more hard data on the subject, see: "This Recovery is not a Mirage".

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