Economy Update May 2009

I recently attended a Business Insight Seminar, hosted by Chase Bank. The speaker was Jeff Thredgold, an economist, who was both informative and entertaining. The goal was to provide business owner's with a guide to managing and succeeding in our current economic state. Happily, Mr. Thredgold is practical and realistic, but also enthusiastic about our future. It was one of those rare opportunities where we not only heard (again) about the state of our Union, but also heard that repeated message that America's future remains bright. The following is a summary of the seminar taken from my notes:

~ Recessions occur on a cyclical basis and actually make our economy stronger

~ The two recession prior to this one, each lasted 8 months. The 1974-75 recession was in response to oil issues. The 80's recession occurred due to high inflation. This current recession, caused by Housing, Banking & Wall Street issues, officially began in Dec 2007 and has just about run its course.

~ Employment will continue to decline for the remainder of this year with employment opportunities beginning to surface in early 2010. The job losses will create a very talented hiring pool and businesses poised to dive into it will reap the benefits

~ Unemployment will continue to decrease throughout 2010 and be greatly reduced by 2011

~ This is a great time for people to improve their educations. The value of a strong educational background will continue to rise. In 1980, college graduates made 25% more than non-college grads. In 2009, college grads will make 90% more than non-college grads.

~ 1 out of every 3 college students is now over 40 years of age.

~ Advanced computer skills translate into 15% higher wages than those that only know computer basics

~ The last 6 weeks have seen the largest stock market rally in 70 years

~ Consumer inflation last year was the smallest in the past 55 years

~ Deflation = declining wages and income

~ Inflation results in Competition, Improved Consumer Behavior, Investment and Improved Technology

~ We have only tapped 10% of the Internet's potential. The greater use of the Internet will create tremendous global savings

~ 65,000 new websites emerge every 60 seconds worldwide

~ For the first time since World War II, the US, Europe & Asia are in recession at the same time

~ Economists are looking 20-30 years in the future when they release their opinions. Interest rates are not expected to increase anytime soon. Stocks will start to rebound within the next year, returning to respectable levels in the next 3-10 years, but not as inflated as before this recession.

~ The goal of the government is to offer 30 year fixed rate mortgages at 4.5%. Mortgage interest rates are approaching an all time low. These are all signs of market stabilization

~ Future employers will have access to many experienced boomers who will be looking for different ways to work. 84% of all boomers do not want to completely retire. They want to work, but with less structure and long-term commitment. Businesses that can find flexible ways to meet these needs will benefit from that workforce

~ China now has the third largest economy in the world. 600,000 people move from the fields to factories on a annual basis and 20 million jobs have been lost in their current recession. Civil unrest is growing there

~ Canada is also in recession. The US is their best customer

~ India is the 2nd largest economy, has had the longest running democracy, has the largest middle class and is the largest English-speaking country

~ The UK has the weakest economy now and the lowest interest rate since the 1600's

~ Mexico is in deep recession and has serious problems with rebounding due to drug trafficking, violence, & now the flu epidemic

~ Locally, Milwaukee added 8400 jobs from 2005-07 and had lost 20,000 jobs in the past 12 months

~ Total de-regulation during the prior 8 years has now led to a need for over-regulation in order to achieve balance and economic stability

~ A baby girl, born in WI, now has a 50% probability of reaching age 100

~ The average U.S. home garbage disposal eats better than 2/3rds of the world

~ The top 3 guaranteed growth industries are: Health care, Financial Planning & Leisure/Entertainment

~ In a free economy, people respond to incentives and this = success. It is important that we don't remove all incentives. The travel, entertainment and incentive industry is losing hundreds of thousands of dollars and jobs, and needs to be supported.

~ The 7 Key Industries of the future: Technology, Transportation, Telecommunications, Financial Services, Energy, Entertainment & Bio-Medicines

Mr. Thredgold is upbeat and positive about our country's future. He believes we will emerge a stronger, healthier nation. Hopefully we can all hang on for the ride! The Tea Leaf is an email newsletter provided by Thredgold Economic Associates. If you need some good news, you can sign up to receive the newsletter free at http://www.thredgold.com/