The president of a local building company comments: “Until Washington corrects the mistakes it has made, such restricting bank lending so that the banks have curtailed their lending, or realizes that they cannot keep spending because, unlike government, the American public knows you have to pay your bills — we will not see much of a recovery. And when we do, it will be a jobless recovery. Businesses have found out they can do more with less staff, and the burden of more imposed government costs such as health care will discourage the hiring of new employees.”
Slow job recovery. Lack of credit. The mantras for 2009.
“My primary concern for Dane County,” noted the president of an area college, “centers on generating jobs for those who are now unemployed or underemployed. For those who are fully employed, the recession may be winding down during the next fiscal year. But the higher levels of unemployment will have a continuing impact on our communities.”
Commented a large printing house manager: “Wall Street is getting ahead of Main Street. The stock market has bounced back; jobs, disposable income, credit have a long way to go.”
What should be we noticing about the data?
First, the baseline each month is not the same as for prior months, because “current levels” change. When we ask for projections, for example, of charitable giving, it is in relation to where they are at the present time. So if 57% said they decreased the giving levels in June, and up to 73% anticipated they would drop levels of giving during a subsequent month, by the time the projection “improves” to 32%, in December, it is 32% of what current levels are. It isn’t necessarily a “better outlook” — it starts from the “new normal” of a current spending level every month.
And so you can see why we call in experts to help us give you an accurate portrayal of all of the data on IBMadison.com. It’s a complicated statistical analysis, but the numbers do speak loudly.
IB Asks:
Commentary from our Participants:
IB partnered with Chamberlain Research Consultants (CRC) to poll a pre-selected group of 100 companies.The IB100 group includes cross-industry, business-to-business, and business-to-consumer entities, and a few significant nonprofits.
Here are a few comments received:
High Tech/CEO: The overall economic outlook remains fairly bleak. There appear to continue to be underlying factors in the economy that will keep us from recovery for a long time. It would be great to see the government trust small businesses more by allowing for loosening of credit, when appropriate. Right now, it’s very difficult to obtain credit or even renew what was in place for many years.
Builder/Pres: Selling my personal house and purchasing a spec house from my company has helped both on my personal and company debt ratios and will make 2010 more manageable.
Restaurant/Owner: Government is out of money and they need to live within their means. People need to get to work. People can’t always wait for the perfect job. Work hard and the better job will find you.
Collection Service/Pres.: The government needs to both understand and demonstrate that small business is critical to the recovery and quit treating business owners as the problem as opposed to the solution.
Residential/Commercial Flooring/Pres: Just finished budgeting and anticipate some segments of our business to do about 8-10% better than ’09, while others will be same as ’09 or slightly less.
Real Estate Co./ Pres: We think the real estate market will improve marginally in 2010, but not return to “normal” until 2011. The extended credit will push sales into the first half of the year, but it’s very difficult to predict beyond that. If inventories are drawn down sufficiently and consumer confidence continues to improve, we should be on our way to some kind of stability by the end of the year. We need to allow the market to heal on its own so that we can figure out what “normal” really is and plan accordingly.
CPA/Pres: I think small business is still hurting. The lack of lending by banks is not helping the economy.
The Economy
A review by Michael Dubis, CFP
Stock markets continue to ride high. But so does unemployment. Assessing our local leaders’ response to our monthly surveys, it appears no one is exceptionally excited about the local or national economies and, in fact, if you look at the trends, it appears that (as a group) we think things are starting to look a tad sour. Perhaps it’s this ongoing sense of trepidation and ambiguity. Perhaps it’s this obvious awareness that we all have that 2010 is going to be the year we start feeling the effects of proposed tax increases and policy changes.
Locally, state cuts are coming. As I wrote in my blog “Financial Perspectives” last month, states cannot print money like the Federal Government can, so tax increases and budget cuts will continue. Although the recent federal stimulus is still in process to be sent to the states, it is being used up quickly — most of it to cover huge deficits, not to increase productivity. There is little reason to think there will be more to follow, since the Federal Government simply does not have the funds. In any event, federal stimulus does not improve your wealth position, so it is a mute point. Whether you are working or retired, you need to consider lowering your expectations of benefits.
Furthermore, Real Estate tax bills came out in December. I’ve already done the math for you … property taxes have risen around Dane county by 6% to 12% … this is all when the government is telling us inflation is 0%. This is a real cost of living increase on home ownership that is essentially three to six times the rate of inflation! This is an absolutely unsustainable trend.
Across the question spectrum, respondents have become discouraged.
- Local economy viewpoint has trended downward since the summer.
- National outlook continues to look fair to poor overwhelmingly.
- It appears our current economic picture is dipping as well.
- Revenues are dipping.
- Staffing is either saying the same or decreasing.
- Finally, charitable contributions appear to be dipping as well.
This does not bode well. Our respondents offer a fair mix of major industries and governments in Dane county. They are key creators of jobs, wealth, and charity. In an area like Dane county, so directly or indirectly dependent on just a few major employers, coupled with our egregious tax system in this state, a trend-line like this could mean more of what we saw in 2008 and 2009.
Poor economic outlook, an increased tax regime, and lower benefits means less available for savings and investment. It will be very important to place greater emphasis on hedging your own situation.
I wish I saw more optimism in the short-term … it’s just not there.
