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.
THE US ECONOMY STEADILY IMPROVED THROUGH THE REMAINDER OF 2009. But by November, we were (and still are) 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.
On February 26, 2010 the US Bureau of Economic Analysis said that the real Gross Domestic Product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.9% in the fourth quarter of 2009, according to the "second" estimate released by the Bureau. The first (preliminary) estimate that appeared on January 29, 2010 of Q4 GDP was +5.7%. The Q4 GDP was the fastest growth pace in more than six years. In the third quarter of 2009, real GDP increased 2.2%.
On March 5, 2010 the US Labor Department reported that US employers cut a smaller than expcted 36,000 jobs in February 2010, leaving the overall US unemployment rate steady at 9.7%. Moreover, job losses for December and January combined were revised to show 35,000 fewer jobs lost than previously reported. The labor market is gradually improving and the pace of layoffs has slowed markedly from early last year when the US economy was losing 750,000 jobs on average a month. Manufacturing actually added 1,000 jobs in February 2010. Also, temporary hiring added 48,000, a sign that more permanent hiring lies ahead.
On April 2, 2010 the US Labor Department said employers added (you read it right! added!) 162,000 jobs in March 2010, the most since the recession began in December 2007, when George W. Bush still had another 13 months to go in office, unfortunately. The March 2010 total includes 48,000 temporary workers hired for the US Census. The department also revised January's job total to show a gain of 14,000, up 40,000 from a previously reported loss of 26,000. February's job numbers were also revised higher by 22,000 to show a loss of only 14,000. The economy has now added jobs in three separate months since the recession began. Private US employers alone added 123,000 jobs in March 2010, the most since May 2007. Many people forget (especially Republicans), that the US economy needs to add more than 100,000 jobs a month just to absorb new entrants into the labor market, let alone provide a livelihood for the 15 million Americans already looking for work. Without constant, robust growth, such as during 1993-2000, the unemployment rate won't budge. In past recessions, it took years before employment numbers returned to pre-recession levels. In March 2010, Manufacturers added 17,000 jobs, the third straight month of gains. The average work week increased to 34 hours from 33.9, a positive sign. The unemployment rate remained at 9.7% for the third straight month. The increase in March 2010 payrolls is the latest sign that the economic recovery is gaining momentum and healing in the job market is beginning. "It's just the beginning of a rise in private hiring that will help sustain the recovery," said Stuart Hoffman, chief economist at PNC Financial Services Group. "They're not big numbers, but they're welcome numbers." The uptick in US economic activity continued in April 2010, until the British Petroleum (BP) Deepwater Horizon Oil Platform exploded in the Gulf of Mexico. In this consultant's opinion, this set off a wave of pessimeism across the USA which among other things, has arrested the ongoing improvement in the US economy.
As we now warily wade through Q3 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.