After concern about health and safety is worry about the economy and our livelihood. Thus, we thought we’d address this topic with the latest information by the experts….and a few of our thoughts thrown in for good measure.
According to the economic update by the Inland Empire Economic Partnership, “When Will We See the Light at the End of the Tunnel?“, we are headed into a recession (not surprisingly), but all hope is not lost! In essence, the report talks about two scenarios.
- Optimistic scenario: It assumes a decline in infections by early April with the virus under control by June, passing of the stimulus package, existing medications adopted to treat the serious effects and a vaccine ready within a year. In this case, we’ll go into a recession but the economy will start turning up in the 4th quarter or at least by the first quarter of 2021. It will be a V shaped downturn.
- Pessimistic scenario: In essence, the assumptions above do not come true, and the vaccine takes 18 months to develop. Certainly, the outlook isn’t as rosy with this scenario, and there won’t be a recovery in 2020.
We all hope the optimistic scenario is the likely outcome. As the report states, the Wall Street Journal surveyed 34 professional economists and categorized them into “pessimistic”, “baseline” and “optimistic”, and the IEEP “optimistic” outcome is more in line with the Wall Street Journal “pessimistic” outcome, and so this signals hope.
As it relates to businesses, non-critical businesses are certainly going to struggle until the coronavirus is under control. In several states, these non-critical businesses are shutdown. In some cases, employees have been let go; others furloughed; some are working remotely if feasible and some are finding creative ways to keep the business running or are changing directions as best as possible. Clearly unemployment claims are surging.
With that said, more opportunities are born during recessions than any other times so keep your eyes open. For example, perhaps you can tweak your products so that you can supply some critical products during this period. Or, perhaps you can develop a new product that can launch as soon as businesses are re-opened. Or have you thought about a new service that could make you stand out from the crowd as businesses start to ramp up? Or how about stealing top talent? I just love the story of a CEO of one of my clients. He hired a talented engineer during the Great Recession when he was let go and no one else was hiring, and that resource helped him excel to first in his market following the recession.
For those businesses considered critical, the picture is a bit brighter. For example, I am working with a food bar manufacturer, and people are stockpiling food bars. Thus, volume has spiked for food bars sold through grocery stores and Costco. In their case, it has trailed off for weight management bars and so they have a mixed bag. Certainly, toilet paper manufacturers cannot keep store shelves stocked! Medical products are also in high demand.
The $2 trillion dollar stimulus package was signed into law. There is assistance for individuals, businesses and workers. We are continuing to post resources to explain the benefits. I thought this article did a good job in describing the stimulus benefits (thanks CLA), and there is loan availability and forgiveness included as well. Stay tuned for updates on our coronavirus resources webpage.
Stay tuned with our coronavirus resources webpage. We will continue to add the latest economic forecasts, stock market analyses and more. However, instead of fretting about the future, take a step back (after all, you are probably in lockdown) and think about how you should reposition your business for the future. It is an opportune time to rethink strategy. If you’d like help to discuss further, please contact us.