Categorized | OP/ED

A Perfect Storm?

Posted on 09 July 2011

Southlake, TX –  July 9, 2011. One of the problems facing our economy is that after slashing jobs during the recession, employers are still reluctant to replace them. Companies have implemented more business processes and deployed even higher sophisticated technology which provides for more work and revenue out of reduced staffs. Productivity and corporate profits have soared. But companies do not want to add workers until they’re confident that consumers are spending enough to support higher sales which leads to even higher profitability.

 

Other factors are restraining hiring. Today’s sophisticated software tools are allowing businesses to scrutinize changes in their businesses minute-by-minute. They can postpone hiring until they’re certain they need more workers.

 

Unemployment has climbed for three straight months and is now at 9.2 percent. There’s no precedent, in data going back to 1948, for such a high rate two years into what economists say is a recovery.

 

The economy added just 18,000 jobs in June. That’s a fraction of the 90,000 jobs expected and a sliver of the 300,000 jobs needed each month to shrink unemployment significantly.

 

The excruciatingly slow growth is confounding economists, spooking consumers and dismaying job seekers. June’s employment report forced analysts to re-examine their assumption that the economy would strengthen in the second half of 2011.

 

The tepid recovery is taking a toll on consumers, whose spending accounts for 70% of economic activity. The Conference Board business group stated that its consumer confidence index fell to 58.5 in June. A healthy reading is 90. At this point after the previous three recessions, the index averaged 87.

 

The low reading suggests consumers are wary of spending. This could leave businesses even more cautious about hiring

 

What about the fight in Washington regarding the debt limit? There is consensus among economists who speculate should Washington not raise the debt ceiling by early August, the economy could slip back into recession.

 

Even if President Barack Obama and congressional Democrats and Republicans agree to raise the debt ceiling, the deal will likely require deep cuts in government spending and possibly tax increases. Combined, these initiatives could slow the economy even further.

 

Heightening the uncertainty are Europe’s debt crisis and the possibility that China’s efforts to tame inflation will slow its booming economy. Both factors could destabilize financial markets and reduce U.S. exports, which is one of the economy’s few strengths.

 

If the U.S. economy continues to struggle it’s only a matter of time before every economy has problems.

 

Not all is not gloom and doom. Gasoline prices are falling (for the time being) and factories are revving production upwards again.

 

Sluggish U.S. gasoline demand may delay Brent crude reaching $125 per barrel next year.

 

How will all this affect your business? Contact The Cypress Group.

 

The above OP/ED was prepared by;

 Doyle J. Girouard

CEO and Senior Managing Partner

The Cypress Group

email; doyle@thecypressgroup.com

Phone: 817-421-4774

Cell: 817-307-7577

© 2008 The Cypress Group – All Rights Reserved

NOTICE – PROPRIETARY INFORMATION ALL RIGHTS RESERVED

This article and its contents are the property of The Cypress Group. Because it contains confidential information proprietary to The Cypress Group, no copies may be made whatsoever of the content herein, nor any part thereof, nor should the contents be shared with any party without the express written consent of The Cypress Group. This copy must be returned to The Cypress Group upon request. The Cypress Group reserves all rights to ownership, use, reproduction, distribution, and publication of this document and the intellectual property therein. Some parts of the document are reprinted from other sources

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