HP likely to be Hurd-ing for a while, but business spending on equipment and software among few bright spots in sluggish new economic report. Companies investing for the future, but spending more on infrastructure than on people. Are you seizing the day or still hunkering down?
I ran into a neighbor of mine on the beach yesterday who thought I still toiled for a high brow financial publication. “So are we out of this thing or not?” he asked me, after mentioning his plans to subdivide his property and start building on both lots – both “scaled down” versions of his current abode. He’s a teacher at an upscale private school and his wife works in a stable healthcare organization. So while neither occupation is as “recession-proof” as they’ve led themselves to believe, they’re feeling pretty good about life right now.
“How the heck should I know if we’re out of this economic S--storm?!” I thought to myself, since nothing I could say was going to dissuade him from his renovation plans. But, then thought I better respond with something a little more scholarly in case anyone else was listening in. I took a deep breath, admired the sailboats and kayaks frolicking on the water and came up with this pearl of wisdom: ”It all depends,” I said. “Depends on what?” he replied, with some impatience.
I said it depends on whether you think things are getting better or whether you think things are getting worse. Overall personal incomes dropped nearly two percent last year, according to US Department of Commerce stats and my neighbor and I live in one of the five wealthiest -- but hardest hit metro areas in the country (see stats)
My neighbor's obviously pretty optimistic about the future and that’s my point. He may not be earning a king's ransom, but his kids go to an elite private school for free. He's got summer's free, doesn't commute far and his wife's doing well, too.
People and companies who think things are getting better are hitting the ground running with expansion plans, they’re hiring, they’re pulling the trigger on delayed purchases, refinancing their mortgages etc. with the thought that “things may never be this cheap again for a long, long time.”
At my neighbor’s elite school, he said they haven’t lost a single family during the recession, “but they’re sure re-thinking that country club membership.” At the other end of the spectrum, we know have close to 2 million people going on 99 weeks of unemployment benefits and that’s not counting the discouraged, early retired, independent contractors, etc. which is probably three to four times that number.
Switch gears to Middle America. WalMart’s still doing well (Net sales for the first quarter of fiscal year 2011 were $99.1 billion, up six percent from a comparable quarter last year), but Nascar events that continually sold out in the middle of the decade drone on in front of acres and acres of empty seats. Nielsen says Nascar’s TV ratings are down 25 percent 2005 Nascar merchandise sales are down 23 percent from its 2006 peak according to The Licensing Letter. Consumers saved a whopping 6.4 percent of the after-tax income in June, according to a new report. It was one to two percent before the recession, and for most of the Baby Boom generation’s adult lives.
They don’t see any improvement from September 2008, when most folks think we officially went into the tank, and they’re hoarding cash like there’s no tomorrow. Millions of homeowners would unload their homes tomorrow if anyone would actually buy em. Millions of employees still lucky enough to have their jobs are fed up with being paid the same as they were five years ago, despite handling double the workload and three times the stress. They’d leave in a heartbeat if there was anywhere else to go.
So it all depends on whether you think things are get better at a better rate, or things are getting worse at a worse rate.
On Friday, HP’s remarkable turnaround was derailed temporarily by sexual harassment allegations against CEO, Mark Hurd. The company’s stock price took a 10 percent hit on the news, but the company will find a way to shake it off, stay focused and get back on track in the same matter of fact way it issued Friday’s press release about Hurd’s termination.
Outside the corner office, the U.S. economy lost 131,000 jobs in July, but that number was distorted as the government let go 143,000 temporary Census workers during the month. The more closely watched private payrolls numbers were also disappointing, showing just a 71,000 increase, less than the 100,000 that economists expected. To make matters worse, the June data were revised lower to a loss of 221,000 jobs from a previously reported 125,000. But the official unemployment rate improved to 9.5 percent, which is a few ticks less pathetic than 9.7 percent last month.
Great. So, things really are improving you say? Not so fast.
Ben “the Bummer” Bernanke, said last Monday that while the U.S. economy continues to grow at a moderate pace – 2.4 percent in Q2, down from 3.7 percent in Q1 -- significant restraints remain on the recovery. In prepared remarks, The Fed Chairman said the U.S. had a "considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings."
Companies spending on equipment, processes – not people
But, the government report showed a bright spot continuing in the economy: the growth of business spending on equipment and software. This spending continued to surge, increasing by 21.9 percent in the second quarter, compared with a 20.4 percent rise in the first three months. The figures highlight the contrast in the economy between high company profits and a persistently feeble jobs market keeping consumers at bay.
Many management and turnaround consultants I’ve talked to said business has never been better. And if you’re selling productivity tools and processes, things are looking pretty rosy too. So if you’re in the business of helping organizations do more with less – you’re liking this long-term state of flux and uncertainty. But, if you’re trying to get in, stay in or sell to an organization who’s trying to do more with less, than it’s kind of a sucky time.
So if you’re trying to reach B2B decision-makers then we recommend you hit it as hard as possible right now as we’re about to enter the Q4 selling season. There could be several years of pent up demand unleashing itself between now and year-end and you don’t want to be kicking yourself this time next year wishing you had made one more phone call to that VP or Purchasing, or sent one more e-mail blast to that Sr. Manager of Technology or tried one more time to get that white paper over to the Web marketing manager who asked for it two months ago, even though they said budgets were frozen? And what about that Webinar you scrapped mid-summer, because you thought too many thought influencers would be out of the office? Could you have just blown a chance to make the sale of the year in order to save a few bucks in your marketing budget?
When it comes to long-term purchase decisions, you never know if it's six time you touch a prospect, the ninth time or the 12th time that will do the trick.
If things are so bad, then how come business magazine ad pages are up 40 percent at Forbes from this time a year ago (Source; Mediaweek or 36 percent at Wired or 33 percent at Inc?
As we’ve been trumpeting all summer, we’re fast approaching the tipping point in which the “Opportunity Seizers” will be zipping past the “Hunker Downers” and the “Shoulda-Woulda-Coulda’s.”
Which train will you be on?