I recently attended the 2010 Mid-Year Economic Forecast, presented by the Mihaylo College of Business and Economics at Cal State, Fullerton. The talk outside the conference was restrained optimism; a “maybe not bad as before” attitude. Here are some of the highlights from the presentation.
Unemployment remains uncomfortable high. More concerning, 40 percent of the people who lost their jobs have been unemployed for 6 months or longer. The economist stated that the recession is over, but growth will be slow and it will take many years before the economy can absorb those lost jobs.
Continuing to weigh down the economy is housing with high mortgage delinquency rates, banking with 40 percent of the bad debt yet to be realized on the balance sheet, the labor market as mention above and thereby a lack of consumer spending.
On a positive note, supporting the economy is an increase in exports and the fact that inventories are at an all time low, suggesting companies will need to begin producing. Aggressive monetary and fiscal policy continues to support growth but the big question is how long this can continue before inflation worries come into play.
To bring the economy back into balance credit must be allocated more conservatively. Consumption as a percentage of GDP is 70 percent. As credit continues to tighten, consumers will be forced to change their spending habits. In the New Economy, consumers will be more likely to save and purchases will rely more on cash or debit cards.
An interesting trend is the changing structure of the labor force. Currently the average workweek approximately thirty-four hours, therefore companies have room to increase hours rather than hire additional personnel. When in need of additional staff, and fearful of committing to new hiring, companies are moving towards contract labor rather than employment. This trend is expected to increase, whereby workers will be selling their services to several companies rather than becoming an employee at one.
I personally left feeling hopeful. I acknowledge that we are never going back to the good old ways of yesterday but then again, I have long held the question of whether they were really that good anyway.
I am fascinated by the concept of the “New Labor Force” and strongly believe it will bring new opportunities for both employees and companies by providing a labor/job/time flexibility that can benefit both.