Two realities of economic recovery

After more than a year looking, my neighbor finally landed a job. He previously worked as a construction manager, which is undoubtedly why it took him so long to find work again. His new job isn’t in construction but instead is related to supply chain management. He sells software that helps various tier suppliers communicate more efficiently. At a recent holiday get-together, neighbors came by to congratulate him. It’s so good to see someone get back on firm financial footing.

Then there’s the house up the street. Two months ago the vacant dwelling was sold at a fraction of its original value. Then there’s another house that’s been on the market longer than my 3-year-old daughter has been alive.

Sheesh.


In a way, my street represents the good and bad of this economy. People like my neighbor personified the structural unemployment problem. His job wasn’t coming back, so he retrained in a different industry, and he found work. I don’t know what salary the company offered, of course, but he joked that he got a 100 percent pay raise. Something is so, so much better than nothing.

Meanwhile there’s this albatross around the neighborhood’s neck. Houses aren’t selling, and we’re all worried about how long this depressed housing market will last. It’s scary when people can’t move to where the jobs are.

A few weeks ago I spoke with Stewart Cramer, president of LAI International, a contract fabricator based in Scottsdale, Ariz. He told me that company revenue fell by 13 percent in 2009, “but our margin as a percent of sales actually grew.”

Today the company analyzes business opportunity very carefully. “We essentially look at our budget every week now, and we’re constantly checking to see if things are happening according to our plans. We’re much more careful about spending, and we react quicker than we ever did,” Cramer said. He added that in 2011 LAI will keep its focus on margins but may at last see some significant top-line growth.

Revenue growth is tied to consumer confidence. Most of us remain employed, after all, and if we are confident that we will remain employed, we’re more likely to open our wallets a bit more. But like LAI, we’re all a bit more careful.

It’s as if there are two economic realities. The first reality is optimistic. At this year’s FABTECH®, for instance, attendees told me that business conditions were positive. Many were excited about 2011. The recession’s survivors are in a good position to grab market share and start growing. The market pie also is finally getting a little bit bigger, thanks to consumers spending more. The second economic reality isn’t so rosy. Structural unemployment and the still-out-of-whack housing sector won’t be whisked away easily. It’s as if one reality is fighting the other.

My hope is that the first reality wins.