FASTER - BETTER - CHEAPER - SAFER ... will the pressure never cease? It would seem not! Let's think back for a moment. We all struggled through Q1 2008 and sank deeper into the latest recession that began in December 2007. Q2 & Q3 2008 brought even worse economic news.
Then Q4 2008 was the worst quarter of the year! The US economy at the end of 2008 contracted at a far faster rate than initially estimated, a US Bureau of Economic Analysis report released February 27, 2009 said. The decline in the country's gross domestic product in Q4 2008 was the worst since the 1982 recession, and indicated that the recession had been even deeper than previously believed. Output fell 6.2% at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8% decline.
On April 03, 2009, more bad news was released by the US Labor Department. The nation's unemployment rate jumped to 8.5% in March 2009, the highest since late 1983, as a wide range of employers eliminated a revised net total of 699,000 jobs.
Another 539,000 jobs disappeared from the economy in April 2009, and the unemployment rate jumped to 8.9%, its highest level in a quarter century, the Labor Department reported on May 08, 2009. Yet the deterioration was slightly milder than expected, prompting encouraging talk that President Obama's stimulus plans were beginning to work. But the troubles left to us by the outgoing administration ran deep and it was clear then that it would take many more months to dig out ways out of this recession.
Nevertheless, a few optimists had been suggesting that the May 8, 2009 Labor Department report of 'only' 539,000 jobs lost in April was a sure sign that the worst was over. The revised figure for April was even better...only 504,000 jobs were actually lost, said the Labor Department on June 5, 2009. More striking is the Labor Department report for jobs lost in May 2009, released June 5, 2009... only 345,000! Yes indeed; a definite improvement!
But the damage done since the recession began in December 2007 was very much still with us, as articulated soberly and comprehensively in a June 5, 2009 article in the New York Times by Peter Goodman & Jack Healy, entitled, 'Hints of Hope Even as Jobless Rate Jumps to 9.4%.'
The July 2, 2009 Labor Department report showed that US employers cut a larger-than-expected 467,000 jobs in June, driving the unemployment rate up slightly to a 26-year high of 9.5%, suggesting that the economy's road to recovery would continue to be bumpy. But then on August 7, 2009, the annoucement came that U.S. employers throttled back on layoffs in July, cutting just 247,000 jobs, the fewest in a year, and the unemployment rate dipped to 9.4 percent. It was a better than expected showing that offered a strong signal that the recession may have bottomed out.
On October 2, 2009, the Labor Department said that the jobs lost in August were 207,000, not the higher figure of 216,000 jobs lost reported for August originally. However, the initial figure for September job losses was 263,000, higher than expected. We were all wishing for better job numbers by then, but it's important to remember that as recent as Q1 2009, job losses were averaging 699,00 per month.
Happily, there were signs as November 2009 began that the US recession may have bottomed out. Indeed, the US Commerce Department reported a prelimiary estimate on October 29, 2009 that the country's GDP increased in Q3 2009 some 3.5% (since reduced but still over 2% positive). This rebound ended the record streak of four straight quarters of contracting US economic activity. Stocks in general had surged about 50% since their March 2009 lows. Venture capital investments in the San Francisco Bay Area in Q3 2009 ticked up for a second straight quarter, per an October 20, 2009 report from the National Venture Capital Association. On November 2, 2009, the US Commerce Department reported "that orders to US factories rose 0.9% in September 2009, better than the gain economists had expected. Demand increased for both durable goods, and non-durable goods, helped by strength in autos, heavy machinery and military aircraft." The fifth increase in six months spurred "hopes that a revival in manufacturing will help support an overall economic recovery.''
But we were and are still far from being out of the woods. While venture investment was up slightly in the Bay Area, across the USA venture capitalists plugged only $5.1 billion into 616 deals during Q3 2009, down 6% from the previous quarter, according to Dow Jones. The US Consumer Confidence Index released by The Conference Board sank unexpectedly to 47.7 in October 2009, falling for the second straight month as the assessment of present-day conditions fell to its lowest level in 26 years. As if to intensify the misfortune of many struggling citizens across the country, Wall Street firms continued to pay out huge bonuses for 2008 (and will again for 2009), even though some of the firms were (and are) still partially-owned by taxpayers via TARP bailout money. Meanwhile, gas prices are rising again (since March 2, 2009 the value of the dollar had fallen 18% against the euro, and in that same period, a barrel of oil had doubled in price to around $80). Health care costs remain out of control, and wars continue in IRAQ and Afghanistan. The impact of the Senate version of the new Health care bill passed on Christmas Eve 2009, will take years to be felt.
In fact, several economists were going so far as to suggest that some of the recent uptick in US economic growth was just a temporary bounce off the bottom, and it's not sustainable.
Keep in mind: even if the USA is fortunate enough to experience a sustained economic upturn, increased employment always lags, returning to pre-recession levels only after years in most cases. Despite the fact that President Obama's $787 billion stimulus plan has saved or created more than 1 million jobs, unemployment continues to rise (10.2% as of November 6, 2009 across the USA with the US economy having lost 7.4 mllion jobs since the recession began in December 2007, 14 months before the previous president left office). The November job losses did however, show a tiny number, and unemployment dropped to 10.0%. While US unemployment remained at 10.0% in the January 09, 2010 Labor Department report for December 2009, the country did lose another 85,000 jobs in December. Underemployment was 17.3%.
Nevertheless, some welcome news appeared on January 29, 2010, when the US Government released an estimate of GDP in Q4 2009, a robust figure of 5.7%, the fastest pace in more than six years. Q4's GDP increase followed a 2.2% increase in Q3 2009. Even with this Obama-led expansion in the 2H 2009, it was not enough to overcome the negative Bush 43 legacy of the 1H 2009, so that for the full year of 2009, the economy still finished 2009 with its biggest contraction since 1946. No wonder the economic mood has not improved. Employment is not yet benefitting. The economy seems to be able to grow even without adding many workers, as up to now employers have found ways to accomplish more with fewer workers. Productivity grew at a robust rate of 8.1% in the third quarter of 2009, the most recent data available. Q4 was likely another big quarter for productivity. But soon, new workers will need to be hired. Now may well be the time for the President's new Jobs Proposal, wherein companies would receive a tax credit of up to $5,000 for each new hire, and an additional credit on Social Security payroll taxes for raising wages.
As we now warily wade through Q1 2010, every business enterprise faces accelerating change and aggressive competition. High Technology companies may be the most challenged of all! Slowing growth - shorter product life cycles - fewer people - stretched management resources - increased security concerns & international financial risks ... all push both hi-tech vendors and customers to the ragged edge.
After eight years (1993 - 2000) of an improving technology environment in the United States, the following eight years (2001 - 2008) moved the country in the wrong direction. There existed for those last eight years, multiple business, economic and geopolitical indicators that have been causing high-anxiety in the world of high technology in the US and elsewhere. We are only in recent months beginning to make the policy decisions that will allow us to recover.
Nowhere is it more relevant to leverage knowledge and know-how than in high tech, perhaps far more important in today's uncertain times!
Given this reality, smart executives seek to accumulate and apply both knowledge and know-how to create enhanced economic value. Further, they speed access to same via assistance from those who have "been there; done that well". By leveraging outside business consultants with broad experience and keen insight, leading companies anticipate and embrace change, rather than fear it. With advanced and flexible business planning and revised internal processes focused on customer solutions rather than product features, winning companies rapidly gain the competitive advantage.
Please click on the "services" tab, the "case histories" tab, and other tabs in the upper left-hand margin, to see how previous clients of Henke Associates have benefited.