5 Signs That The US Recession Isn’t Over Just Yet

For the past few years, there have been plenty of signals from Washington supported by an assortment of economic experts, that the economic recovery within the U.S. is moving along. But completely detached from the optimistic headlines the media keeps feeding us, the story on the street is totally different.

graphOn the surface, the contradiction seems puzzling. Several recent reports seem to give us a lot to feel optimistic about. The unemployment rate is now below 7%, its lowest level in five years. The housing sector seemed to be rebounding. Home sales and prices in December 2013 were their highest since 2006. Auto sales are up, gas prices have gone down, and Wall Street is roaring with stocks up more than 26%.

But, there are several, pretty poignant signs that our recovery is not all it’s cracked up to be:

1. Many people just don’t feel it. According to a recent CNN poll, only 24% of respondents believe economic conditions are improving, while almost 40% believe that the economy is actually getting worse. Meanwhile, the Consumer Confidence Index has been on the decline.

2. The number of people on food stamps is on the rise. As of March of this year, 47.7 million Americans are now on some form of food stamps. From the year 2000 till 2012, this number has increased more than 171%.

3. The housing market is starting to crumble. While the media is already drawing attention to a recent slow down in the housing sector, many industry experts point out that home prices are actually being driven upward by institutional investors. Big financial institutions like The Blackstone Group have become major home buyers. So far, Blackstone has spent more than $4.0 billion for 24,000 homes in the U.S. that it plans to rent out. But, the same rising home prices that seem to have created a rebound last year, are now accounting for a decline among individual buyers who can no longer afford to buy.

4. The rich are getting richer, the poor are getting poorer. According to a recent report by the Pew Research Center, the bottom 93% of households in the U.S. economy saw their net worth drop by 4% between 2009 and 2011, the richest 7% of U.S. saw their wealth increase by 28% in that time.

5. The recovery is a whole lot of hot air. Many people point to the fact that the rosy numbers Washington keeps promoting are nothing more than smoke and mirrors once you consider things like: how much money the U.S. government borrowed versus produced, the Fed’s obsession with printing money, as well as how key indicators, such as the unemployment rate, are calculated.

In short, though the economy does show some signs of rejuvenation, much of it is due to a thick layer of makeup. Wash it all away, and the picture we are left with ain’t so pretty.

When Uncertain, Invest in the Future

Everything that is done in the world is done by hope.” Martin Luther said it back in the 16th century and it has never been truer than it is in 2013, especially when it comes to small business. CEOs of small enterprises are some of the most hopeful people around, building a business – often from the ground up – on a vision and a confidence in the future.

However the economic events in the US over the past decade have been enough to shake up even the most sanguine of businesspeople. Securities and real estate, formerly considered two of the most reliable investments, suddenly lost their value overnight. Confusion is the key word today: where is the economy going? What’s the best area of your business to invest in?

Small is the New Big

There’s been a sea change in attitudes to technology since the close of the 20th century. Back in the day, big was … well, big, and technology tended to equate big with powerful and efficient. Investing large sums in the latest and greatest computer programs and IT staff was considered essential if not to succeed, at least to give the appearance of success. However, nowadays it’s all about small and convenient, especially when it comes to small businesses that have neither the resources nor the inclination to invest heavily in technology which could already be outdated by the time it is delivered to your door. This attitude is readily apparent when it comes to areas like information technology. Savvy small businesses are moving to SaaS, for example, to avoid investing in the accoutrements of big technology.

Get Healthy

With the implementation of Obamacare looming in 2015, the subject of mandatory health care has been big among business owners across the board. While owners of businesses which employ fewer than 50 full time workers are exempt – at least for the time being – they may find that de facto they will be forced, or at least strongly encouraged, to provide employee health care benefits simply to attract new hires who would otherwise be tempted to accept employment at larger firms that do offer health care. And a business that expands (the hope – that word again! – of most entrepreneurs) will need to provide health care once it exceeds the employee limit. With affordable Small Business Health Options Programs and small business tax credits to help cover health insurance premiums, this might just be a worthwhile area to invest in. And how about purchasing coverage to protect one of your business’s greatest assets – you, the boss – while you’re at it?

Get Smart

Another excellent arena for investment is professional guidance. According to American Banker in May 2013, only 30% of small business owners feel “very confident in their business acumen.” Expert guidance from a management consultant, banker, accountant or other professional can steer a business in the right direction and do more for the bottom line than randomly investing in the physical plant based on guesswork. An optimistic business owner is an asset to his or her enterprise; an optimistic business owner guided by a topnotch financial adviser is a tremendous asset.

Attitude on Economy Remains Bleak for 2011

All predictions indicate that the economic recovery from the 2007-2009 US recession in will remain sluggish well into the next year. (No crystals balls needed.)

According to the latest quarterly AP Economy Survey, economists are not very optimistic when it comes to the economic rebound. As opposed to earlier predictions, now they typically use words like “weak growth” and “higher unemployment,” words that were taboo a mere few months ago.

 

Nevertheless, of the 42 economists who took part in the survey, most expressed their conviction (as of yet anyway) that America’s economic recovery is on track and predicted that a “double-dip” recession can be avoided.

According to the findings of the AP survey, economic growth for this year and the beginning of 2011 will not exceed 3%. Unemployment levels are not expected to fall below the current 9.5%. Many of the economists believe that normal 5% level of unemployment is at least four years down the road.

AP’s economic experts are not alone when it comes to bleak predictions. According to a Fed survey published in July, the economy is not springing back. Chairman Ben Bernanke is reportedly considering new steps to invigorate the economy. Interest rates are expected to be held at record lows for a longer period.

In response to the general slowdown, state and local governments have cut their spending in the first three months of this year at a rate of 3.8%. These kinds of actions cause the average American to spend less as well. According to James O’Sullivan, global chief economist at MF Global, there is always the risk that the lack of momentum will snowball and feed upon itself. Usually it’s the consumers who lead a rebound in this kind of situation, but consumer confidence has not shown signs of recovery.

The lethal combination of unemployment, practically non-existent raises and the real estate slump has left US consumers saving more and spending less. And this is not likely to change in the foreseeable future. Following the pattern of a vicious cycle, low consumer spending causes weak growth, which in turn keeps unemployment high.

But, despite all this, not everything is gloom and doom: 55% of the interviewed economists stated that the recovery as “on track” as of the middle of the year. It’s just that the train is awfully slow.

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Businesses Capitalizing on High Unemployment

As the unemployment rate continues to hover around 9.5%, leaving consumer income depleted, many industries have been suffering. But not every industry has been hit hard by the recession. The truth is that for numerous companies business is booming as a direct result of the high unemployment rate.

What are these industries, and why are they flourishing? Here’s a rundown:

1. Healthcare. Stressed-out people with no money or insurance to take care of themselves are prone to illness. Regardless of financial status, they still need healthcare.

 

2. Marriage and Family Counseling. Job loss and financial insecurity create wellsprings of conflict. Unhappy folk are turning to therapists to help them deal with the changes in their lives.

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3. Career Counseling. Many who have suddenly lost their jobs or who are just entering the job search pool are being forced to reconsider their career paths. Career counselors provide aptitude testing and advice.

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4. Training Seminars. Those seeking new employment opportunities need fresh education and training to prepare to work in alternate fields.

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5. Online Content Sites. Penny pinchers are thrilled to pick up free information, especially when it helps them save valauable time and money.

 

6. Debt Management Companies. People who are steeped in debt are turning to financial consultants and debt management companies to help them get their obligations under control and establish responsible spending habits.

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7. Temporary Staffing and Freelance Workers. Cash-strapped businesses can save a significant amount of capital by hiring temporary or freelance workers and independant consultants.

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8. Payday Loan Lenders.  Payday loan businesses offer small, short-term loans at high interest rates. People with poor credit and little cash often have few alternatives to cover living expenses.

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9. Debt Collectors and Repossession Agents. As income decreases, unpaid bills increase. Lenders need the services of those who will help  them recoup their cash.

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10. Fast Food Restaurants. Business for fast food establishments, such as McDonald’s, been booming as consumers look for cheaper alternatives when eating out.

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12. “Sin” Vendors. Vendors of alcohol, cigarettes, and candy, as well as gambling venues, offer a quick and affordable mood boost to people who are down in the dumps about the economy. Gambling also presents a chance to make some quick money.

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13. Second-Hand Buyers/Sellers. Unemployed customers who would have scoffed at buying second-hand a few years ago, now recognize the value of used goods.

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8 Reasons Why It’s Good to Be Self-Employed in a Recession

As the economy continues to shed jobs, many have turned to or are considering starting their own businesses. There are numerous benefits to being self-employed- especially in recessionary times such as these. One just needs to know how and when to take advantage of them.

The following is a rundown of some good reasons why self-employment is the way to go in a period of economic adversity:

1. Save money on work-related expenses. Depending on the nature of your business, being self-employed may mean that you are spending less on some of the indirect costs of working for someone else, such as transportation, business attire, or food items.

2. Take advantage of rock-bottom prices. In a recession, the cost of raw materials and supplies as well as real estate and even labor tends to drop. That means lower start-up costs and less over head expenses.

3. Have access to a bigger and better talent pool. A surge in layoffs coupled with a drop in hiring means that many talented, often highly qualified and experienced people will be seeking employment.

4. Take advantage of changes in business relationships and business needs. In order to maintain their competitive advantage, many businesses will be looking to establish new partnerships with those companies that can provide better or more innovative ways of delivering products and services. Being a  new kid on the block may open the doors to such partnerships.

5. Get financing from wary investors still looking for a good return. With a volatile stock market and lower interest rates, investors (especially family and friends) may be more willing to invest in your company.

6.  Economic adversity opens the door to new opportunities and innovation. Consumer needs, habits, and tastes often change during a recession paving the way for opportunistic entrepreneurs.

7.  Be a light in the darkness. Creating, promoting, and growing one’s business under difficult economic circumstances, does not only go against the trend, but it demonstrates a different “side” of the market. This will lead to a win-win situation; the human interest stories will sell and the business will gain publicity as a result.

8. Take advantage of any government policy aimed at businesses. The government’s response (in terms of law making and program development) to the economic slowdown can often mean tax breaks and sometimes new business opportunities.

A Look at How Retailers Can Weather the Recession

According to recent research, retail sales have fallen over the last month even as the back-to-school shopping season gets into high gear, and industry forecasters claim that this does not bode well for the upcoming holiday season either.

 


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So the looming question for retailers big and small continues to be how to maintain or even increase sales in such a dismal economic environment.

A month ago I posted this article that briefly examined how some restauranteurs were managing to succeed despite the weak economy. In a similar vein, although the retail industry as a whole is suffering, there are several hot pockets of consumer spending that continue to draw brisk sales. A few big discount retailers, such as Wal-mart, have been able to capitalize on these trends and are focusing on several strategies to keep these consumer dollars rolling in.

Though small retailers may be more limited in their scope then the big discount chains, by studying their strategies, there are several valuable lessons that small businesses can learn and implement. Perhaps the most important of these strategies is that retailers are paying close attention to shifts in consumer attitudes and behavior and then adapting to them.

Here is a brief look at what some of the successful retailers are specifically doing:

1. Focusing on value. Today’s consumers are tech-savvy, bargain hunters looking for the best bang- i.e. value- for their buck. Retailers are concentrating their inventory on what people still need to buy, and then providing it at a low-cost or with some other added value, such as extensive customer support.

2. Promoting a unique brand. It has become increasingly important over the past two years for retailers to differentiate themselves and/or their products and services from those of their competitors.

3. Using aggressive, low-cost marketing tactics. The role that the Internet is playing in consumer decision-making and spending has not been overlooked by retailers, and it is all the more attractive given its low cost. Successful online marketing campaigns include: sending out emails, maintaining a website, offering online coupons, and registering with online directories and Point of Interest databases.

4. Offering promotions. The goal of a successful promotion is to get customers in the door where they will either spend money on other items or services or they will remember the experience and be more likely to frequent the business later on. Some promotion ideas include hosting or promoting events, offering a themed sale, or providing free products or services.

5. Focusing on customer convenience. Retailers are paying attention to how customers are choosing to make their purchases and then building up these areas. Are customers, for example, using cash as opposed to credit or shopping online as opposed to physically showing up at a brick and mortar location?

6. Initiating cost-cutting tactics and tight inventory management. Even the most profitable retailers out there these days are paying close attention to wasteful or redundant spending and are making sure that capital is not being tied up in unnecessary inventory supplies.

7. Forming partnerships. Some stores are forming partnerships with each other, whether banding together to pool resources or reduce overhead costs or offering discounts to each other’s customers.

A Look at How Some Restaurants are Weathering the Recession

A few weeks ago, I posted this article offering a few tips on how small business owners can grow their businesses during the recession. As I noted in the post, even in this dismal economy some businesses are thriving.

But for the majority of smaller businesses the focus has become just trying to hunker down and survive the economic storm while remaining somewhat intact.

One of the best examples of small business survival has been in the restaurant industry. The restaurant industry as a whole has seen both ups and downs over the past two years. Price increases in products and supplies, lower consumer confidence, changes in consumer behavior and demand, and less available credit have all had their impact on food services businesses. Yet many are proving to be surprisingly resilient and are successfully weathering the storm.

What’s their secret?

Successful restaurant owners are paying close attention to changes in the market and then adapting to them, they are also focused on developing and defining their brand..

So what specifically are some restaurants doing? Here’s a brief rundown:

Paying attention to quality:

Many restauranteurs are focused on the quality of the experience their customers have when they come to their eateries. This translates into the quality of the food, the service, and the overall level of hospitality. By providing an enjoyable experience, restaurant owners are giving their customers the opportunity to break away from all the dreariness and are in the processing cashing in.

Creating the perception of value:

These days as people look for ways to save money, they need a lot more incentive to spend it on eating out. Put simply, customers are looking to stretch their hard-earned dollars as far as they will go. One successful strategy used by restaurant owners is to focus on their customers’ perception of value. 

But communicating to customers that they are getting a good value (in terms of food quality, portioning, or ambiance) while at the same time not cheapening the perception of the business is actually a delicate balancing act.  It requires sound pricing strategy, menu planning, and marketing. Several restaurants have begun bundling meals, increasing portion size, or adding extras, like a free dessert, to add value while avoiding the appearance of discounting.

Using promotions to draw customers:

Many restaurant owners are also trying to draw customers with a variety of promotions and specials. Some examples include: having a night where kids eat for free or for a small charge, having a theme night, or setting aside slower times of the day or week for special value deals or unique events. Other restaurant owners are experimenting with cooking classes, dietary workshops, or birthday promotions.

Using the Internet to advertise:

The Internet can be an effective and often cheap means of advertising a small business, and this has not gone unnoticed by many restaurant owners. Many restauranteurs rely on a conscientious email marketing campaign, are making sure their business is listed on the popular online directories, and are a maintaining a website.

Emphasizing their unique brand:

All of the previous points are included in this one. The most successful restaurant owners understand the experience and the occasions that their business (i.e. their brand) is positioned for and are focused on building up these areas.

In short, whether you run a foodservice business, or another kind of small business, there are definitely a few lessons to be learned.

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Which Industries are Thriving in the 2007-2009 Recession?

There is a lot of difficult news out there these days. With all the talk about pension cuts, pay freezes, layoffs, bankruptcies, and government bailouts, the fact that some industries are not only surviving the recession, but thriving in it, may seem hard to believe. But the truth is that in the midst of all the economic turmoil, there are industries that are prospering. Some of these businesses are typical recession-busters, others are particular to the current recession.

1. Sweet Treats

When the going gets tough, the sweet tooth gets going. Inexpensive candies, snacks, and treats become the comfort of many as people try to deal with hard times. In addition to a number of candy manufacturers and distributors around the country reporting a significant increase in sales, Nestle and Cadbury have both reported profits. Ice cream sales are also up among independent parlors as well as name brands, such as Häagen-Dazs and Ben and Jerry’s.

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2. Entertainment

Hollywood is profiting from the recession enjoying one of its biggest years ever in box office sales to the tune of $10 billion. The video gaming industry is also are experiencing a surge in demand. Most notably, in the first week of sales Grand Theft Auto IV, produced by Rockstar Entertainment raked in some $500 million.

 3. Technology

This one seems a bit counter-intuitive at first. As the recession drags on, one would expect the sales of consumer electronics to drop across the board. While there has been a slowdown in some areas, several companies are reporting a surge in sales. Sales of Apple’s iPhone 3GS out-performed analyst expectations by as much as 50%. Sales of netbooks have also been brisk.

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In general the IT sector is going strong specifically in areas of data storage, processing, and management as well as software design and development, networking and systems administration.

4. Life’s Little Pleasures

A little indulgence can go a long way. While high-end consumer products are having a hard time moving in the recession, a range of cheap, feel-good items are experiencing brisk sales. Low-cost cosmetic lines for products such as lipstick and lip balm, anti-aging creams, and self-tanning creams are predictably on the rise. Wholesale beer sales are also doing well. Most notably, Anheuser-Busch, the biggest brewer in the United States, has been reporting a profit despite concerns that rising costs for raw materials like glass, barley, wheat, and fuel would undermine any gains. Finally, tobacco sales across the nation going strong.

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5. Profiting from the Damage

As people across the nation try to get a grip on their mounting debt, it is no surprise that repossession firms, auctioneers of foreclosed homes, debt consolidation companies, debt consultants, collection agencies, and bankruptcy lawyers all have plenty of work these days to keep themselves busy. There have also been a surge in the creation of companies that handle the clean-up and refurbishing of foreclosed homes and their surrounding property. Though these industries may be looked upon as scavengers profiting from the downtrodden, who is going to argue with the fact that someone has to do it.

6. Payday Loan Industry

Call them loan sharks or predatory lenders… but they are still legal. And right now business is booming for the payday loan industry as consumers try to cover their cash shortfall with these high interest, short-term loans.

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7. Health Care

Though the health care industry as a whole is experiencing cutbacks, as the baby boomer generation gets older there has been an increased demand for home health care services and specialized medical procedures generally performed in small outpatient clinics and doctor’s offices. This has increased the need for qualified nurses and specialized doctors.

8. Discount and Second-Hand Retailers

As household budgets get tighter, consumers are flocking to discount retailers, such as Wal-Mart and Dollar General. Thrift stores and Goodwill stores across the country are also drumming up traffic even as sales among other retailers have plummeted .

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9. Re-education

The demand for online degrees, professional certification, and continuing educational programs have all increased. As more and more American workers are laid off (or fear being laid off), many are are seeking re-education opportunities. The trend is also likely due to the increasing cost of higher education that has out-paced inflation for several years in a row. Although quality online degrees still require a significant investment of money, when you factor in the savings from room and board as well as scheduling flexibility, in the end an online degree comes out much cheaper.

Tips on How to Grow Your Small Business in a Recession

Yes, there are small businesses out there that are considering growth opportunities even as our current recession keeps a tight hold on our economy. But for those small businesses that are in this situation, any steps that they take to expand operations should be carefully implemented.

Here are a few tips on how to responsibly grow a small business in a recession:

Now is the time to re-examine, re-define, and streamline company objectives.

A recession often changes consumer demand, spending habits, and attitudes. It is thus extremely important that small business owners take the time to ensure that their businesses are operating in line with this a shifting environment.

Keep up the trust of your employees.

Even if you cannot offer a big benefits package, make sure there are methods in place for employee recognition and that the lines of communication are open.

Focus on customer service.

Catering to your customers is after all the focus of your business, and having good customer service does not have to get expensive. Like your employees, you want to build the trust, loyalty, and regard of your customers.

Develop creative, low-cost ways to advertise your business.

Getting your name out there effectively does not have to break the bank.

One of the biggest obstacles to small business growth is lack of funding or inadequate cash flow.

Make sure that you are doing all you can to maximize cash flow, such as implementing effective debt collection strategies, good price management, inventory management, and the coordination of equipment purchases. You should also be aware of all your financing options.

Stay on top of current trends in technology.

There are many software programs, services and devices on the market that will greatly improve efficiency and give your business a competitive advantage even over your bigger competitors. Many of these essential business tools are also relatively inexpensive.

Keep your eyes open for opportunities.

A recession may provide many opportunities to expand business operations. Real estate, for example, is much cheaper now and so is many raw materials. Consumers also have different needs, and your business may be able to capitalize on them.

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Is Now the Time to Invest in a Franchise Opportunity?

There are several attractive incentives to investing in a franchise business. By buying into a franchise opportunity, you can take advantage of a proven business model and an established brand recognition, not to mention all the training and support that many of the major franchisers have to offer.

But with the economy in a recession, the question is should you take the franchising plunge now?

The answer really depends on the kind of franchise opportunity you are considering, as well as your available resources, your experience, and your level of commitment.

 

Here are a few facts to have in mind:

  • According to The Franchise Business Economic Outlook for 2009, the number of franchises will decline in 2009 by 1.2 percent, and the number of jobs in franchise businesses are expected to fall by 2.1 percent- a loss of an estimated 207,000 jobs.
  • Financing for small businesses (including franchises) is less available since banks and commercial lenders have tightened their loan requirements in response to the credit crisis.
  • Consumer confidence is holding at the lowest its been in years, which means less overall consumer spending.

 On the other hand…

  • Many franchising industry experts point to the fact that the franchising industry has emerged from previous recessions holding in a stronger position, as was the case after the recession of 2000-2001.
  • To attract entrepreneurs, many franchising companies are offering great incentive deals.
  • Start-up costs may be lower during the recession since property values have declined.

 For more information and advice on actual franchise opportunities, check out the AllBusiness Franchise Report.