Outlook on 2020 Economic Conditions
Michael Clegg | 12/16/2019
What white noise are you listening to? If you are not familiar with that meaning in terms of business, it is essentially background noise with very little meaning or significance. News headlines tend to be dramatic in nature and seeking “click bait” as it is how all media outlets drive revenue. There is a lot happening as we head into our next decade. As we wrap up 2019, we are still in the thralls of a trade war with China which brings uncertainty on tariffs. We are heading into an election year and conversations on a Presidential Impeachment. More International uncertainty with United Kingdom’s Brexit. While any one of those alone would have some level of impact on business, collectively, it’s creating a ton of white noise. What about the term “slowing growth”? Slowing growth has dominated the headlines this year. This article will try and breakdown some of the noise and provide some facts and data.
A Vistage Group survey of over 1400 CEO’s has brought the following results.
- 14% of CEO’s said they expect economic conditions to improve, compared to 32% one year ago
- 35% of CEO’s anticipate an economic downturn, double the result of last year (17%).
Dr. Richard Curtin, Economist from the University of Michigan said, “Damage done to the economy from the tariffs, the slowdown in employment growth as well as heightened economic uncertainty has been substantial. Overall, the data indicates a slowing pace of economic growth during 2019.” While some of these stats aren’t great, there is plenty to celebrate and look forward to. Most economists are anticipating a return to increasing growth the 2nd half of 2020.
Today’s headlines create uncertainty. (Tariffs, Trade Wars, Politics etc.) Uncertainty puts the clamps on business growth regardless of the political winds that blow. Companies can deal with political winds changing but they cannot make decisions when there is uncertainty. The antonym of “uncertainty” is “predictability”. Predictability will give all business the ability to formulate a plan for their business.
There is still plenty of great news to share from this Vistage report. In the U.S., employment is high, inflation is low and energy sources have stabilized. As a result, while an economic slowdown is inevitable, it’s unlikely that it will lead to a recession that resembles the Great Recession in either severity or duration. There are no massive layoffs occurring, housing prices have not collapsed, and we are not on the brink of a financial meltdown, but the economy is experiencing slowing growth.
The Job Market is in historical times. The growth of wages continues. A favorable announcement to the China Trade Deal. An agreement to Phase 1 of the China Trade deals appears imminent. Additionally, the recent election last week in the UK gives signs that a conclusion to Brexit is on the way.
Further data from the survey:
- 56% of firms anticipated adding new employees to their workforce,
- 40% of firms anticipated increased expenditures for new fixed investments
- 64% of firms expect increased revenues
- 54% anticipate profit increases
- 56% plan to expand their workforce
Some business strategies that have been suggested are:
- Take advantage of sliding interest rates. The 10-year treasury rate is starting to slide back due to mild inflation, international economic distress and a robust appetite for U.S. treasuries.
- Snag Talent from other Firms not performing as well
- Continue to focus internally on retention
In summary, there are concerns in the Market. The slowdown in growth does have its challenges but overall there are a lot of very positive things to focus on. Job Seekers continue to have a historical job market of opportunities. Employees are seeing growth in wages. Consumer spending continues to be high. Early reports on holiday spending appear to be healthy as well.
This month, some recent news on the above-mentioned headlines driving uncertainty in business could provide some reprieve of this uncertainty. An announcement that an agreement has been reached to Phase 1 of the China Trade Deal which will impact the tariffs. An election in the UK that should lead to a conclusion of Brexit. The antonym of uncertainty is predictability. As more clarity is presented, I anticipate more businesses getting back to growth expectations. If the latest in the “noise” can actually solidify this clarity, businesses can make decisions on overall growth strategies and spending.
Written By: Michael Clegg, The Q Works Group