When does caution in hiring or expanding one’s business because of concerns about a stalling economy become a self-fulfilling prophecy? And when is that caution justified?
That was one of several questions analysts and economists interviewed by National Public Radio addressed last week at an annual economic retreat at a fishing and hunting lodge in Maine.
BCA Research chief economist Martin Barnes says worries about Europe and other concerns are causing companies that are in pretty good shape to sit tight rather than invest in new hires or bring new products to market.
“So we meet again in six months and we look back and say, ‘You know, we were really right to wait ’cause look how crappy the economy’s been doing the past six months,” Barnes told NPR. “Yeah, of course, the economy was crap the last six months because we and every company like us sat on their hands. We never hire anyone. If we had gone out and hired people, the economy would have been better. So you’re creating a self-fulfilling trap.”
Confidence is contagious, be it at the household or corporate level. For our industry, confidence is high-octane fuel for spurring new boat sales.
If confidence is infectious, what about fear and pessimism? When you look at the economy today, with the uncertainly in Europe and the domestic fiscal cliff fast approaching in the fall, do you see the glass as half-empty or half-full?
The NPR report was filed the day after the news that the economy added 163,000 jobs in July, even though unemployment rose to 8.3 percent.
Stuart Hoffman, chief economist at the PNC Financial Services Group, described the economy to NPR in layman’s terms: “not an economy firing on all cylinders, but likewise, this is an economy whose motor has not conked out.”
That’s the glass-is-half-full perspective. Hoffman believes too much gloom and doom hurts confidence.
The latest jobs report, he told NPR, “really does drive a stake in the heart of what I call the vampire economists that always are going to find the worst in all these numbers, who’ve been calling recession. Or are always saying there’s a recession around the corner. They always just want to suck the blood out of the economy.”
“Woe is me” won’t inspire anyone to buy a boat, says Don MacKenzie, vice president and GM of Boats Inc. in Niantic, Conn., a Grady-White, Parker and Yamaha dealer. MacKenzie reports that his dealership is having a strong year.
“We’ve had an incredible year, but we’re still guarded in how we manage our inventory,” MacKenzie says. “I still remember very well the pain of what we’ve been through.”
But, he adds, “The consumer wants to go boating. We haven’t heard gas prices brought up one time. That’s a fake issue. They’re still value-shopping.” Good used boats “are gone within a week.”
After four consecutive months of decline, the Consumer Confidence Index rose a tad in July, even though the overall index remains at historically low levels.
“Consumers' attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement. “However, while consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment — in particular, the weak labor market — consumer confidence is not likely to gain any significant momentum in the coming months."
The surprising jobs number could help spark “somewhat higher” consumer optimism and spending, suggested Kathy Bostjancic, director of macroeconomic analysis for The Conference Board.
“This, in turn, could lift growth moderately higher in Q3 from the moribund 1.5 percent pace recorded in Q2,” Bostjancic said. “However, lackluster demand remains the biggest corporate challenge in the second half of 2012. Without a large improvement in confidence and spending, job gains are unlikely to gather steam. Moreover, the labor market could easily slip back to the moribund growth of spring and early summer, extending an already unusually long ‘jobless recovery’ farther into the foreseeable future.”
I’m closing with MacKenzie, an effective glass-is-half-full kind of guy who is driving business rather than waiting for it to find him.
Cautious as the recent past would dictate, MacKenzie is nonetheless making investments that allow his business to grow. “We hired three full-time people this year,” he told me, “and I need at least two more full time on the sales administration side.”
MacKenzie says, “Nothing happens in this world until someone sells something. That’s when economic activity starts. Everybody at the factory is waiting for us to do our job. We put people to work when we sell a boat.”