Published on: July 27, 2009Thoughts and stories to consider as the workweek begins…
• Good news from Newsweek: the recession, apparently, is over. And now all we have to do is survive the recovery.
It takes Newsweek some 3,500 words to tell the story, but here’s the gist of it. While the recession appears to have receded – based on the fact that the stock market is up 44 percent since March, home sales have improved for three straight months, and seven out of 10 indicators in the Conference Board’s Leading Economic Index are looking good – it is expected that unemployment is going to get worse, possibly a lot worse, before it gets better. (Employment almost always lags in an economic recovery, the story says.)
Also making the recovery hard to assess at this point is the political and cultural debate that persists about the shape of the government’s approach to an economic resurgence. There are just too many questions and too many unknowns to make reliable predictions. And here’s the big question, as posed by Newsweek:
“Historically, the economy has kicked into higher gear when a development comes along that can touch every part of the economy, not just particular sectors: the steam engine, electricity, the computer chip, globalization, the Internet, cheap money. By definition, it's almost impossible to know what the next disruptive, discontinuous great leap forward is going to be. On several occasions, Lawrence Summers has remarked that when he was involved in the big economic summit Bill Clinton held after winning the 1992 election, he didn't recall hearing many mentions of the words ‘the Internet’.”
And so, the process of recovery is likely to be slow and painful, with many consumers having lowered expectations and shifted priorities. As the magazine writes, “Until the next big thing comes along, consumers and businesses will continue to do what they've been doing for the last several months: pay down debt, restructure, and focus on survival. Using federal resources as a lever and crutch, we'll have to take satisfaction in small, incremental gains.”
In other words, the recession may end, but consumers/citizens will continue to recession-minded. (Which shouldn't be an enormous surprise, since they were acting like the nation was in recession long before economists decided that the nation actually was in one.)
• Age 70 is the new 65, according to a story in the Chicago Tribune and numerous other McClatchy newspapers. Statistics indicate that the recession is forcing people to work longer than they intended, with the general sense being that most people are postponing retirement for at least five years because they thinks it will take that long to get back on a firm financial footing.
This probably doesn’t come as a huge surprise; the plummeting stock market wiped a lot of people out, and there has been a lot of conversation about how long it would take for them to rebuild their portfolios and savings, if indeed that is even possible. But it also raises other issues, especially for retailers.
To begin with, how will this shift affect employees and a chain’s labor costs? If older employees – from the store to the executive suite – decide to stay on, what will be the impact on things like health care and benefits costs, not to mention salary expenses?
Companies also need to consider whether customer needs will change if older people stay in the workforce. Will these changes affect how stores merchandise themselves in so-called retirement havens, which depend on an influx of retirees each year? And finally, will this shift – if it lasts – allow/force companies to change mandatory retirement ages that used to be inviolate?
• The Washington Post reported over the weekend on a new development in the globalization trend: “Chinese real estate investors based in Hong Kong and Beijing plopped down a small fortune last month and bought” the Chateau Richelieu vineyard, one of the most prestigious in France – the second such acquisition in about a year.
“In both cases,” the Post writes, “according to specialists involved in the negotiations, the Chinese buyers sought precisely what France is richest in: history, elegance, tradition and savoir-faire. The new generation of wealthy Chinese entrepreneurs in effect came to France to buy a piece of the class, bloodline and heritage that were uprooted in their own country by the communism of Mao Zedong and the Cultural Revolution … In both cases, winemakers reported, the Chinese investors have laid plans to market the pedigree of their newly acquired Bordeaux wines to the nouveaux riches back home. Local realtors estimated the purchase prices at several million dollars each. But with 1.3 billion consumers in a China that is just starting to get reacquainted with the finer things in life, including wine, Chinese getting a foothold in Bordeaux have concluded there is gold in the green bottles soon to be shipped to the other side of the world.”
The investors apparently don't just plan to ship French wine back home. They also intend to renovate the actual chateau at Chateau Richelieu and turn it into a hotel especially designed for prosperous Chinese tourists.
- KC's View:
- So we’ve got a recovery taking place, albeit slowly and in fits and starts, with the kinds of changes taking place in our economy and culture illustrated by some basic shifts in how consumers plan for the later part of their work lives. And, even as all this takes place, globalization continues…with at least some folks clearly still able to pay big bucks for big toys.
The lesson is that it’s a complicated world, and simplistic approaches, responses and initiatives probably won’t be up to the task. As a wise troubadour once sang:
It’s a jungle out there, kiddies…have a very fruitful day.