What are the tea leaves telling you about the current state of the economy? More importantly, are they telling you the economy is still heading down, marking time or already turning around?
As I've mentioned a number of times, don't rely on the news reports in the papers or on television to provide you with the information you need to make the right moves with your business. The news reports and most business reporters are still trying to convince us the recession is still getting worse. However, not unlike their reporting which was behind the curve as we went into the downturn, they are and will be late on reporting the bottoming out of the recession and moving into the upturn for recovery. There are several key, leading indicators you can track that will provide you with insight to the direction the recession is moving; housing and temporary employee hires.
As you know, the mortgage debacle, leading to the implosion of the housing market was a primary driver, leading to this recession. Housing sales plummeted, new housing starts evaporated and the economic downward spiral started. Accordingly, it makes sense that housing supply has to be a key, leading indicator coming back out of the recession. Currently, it's just been reported we have a 10 month supply of housing to be sold, without any new construction being required. That is a drop of two month's supply from previous reports. While the supplies are heading in the right direction, it's not good enough yet to declare the influence on the recession is over. It's estimated that when the housing supply reaches six months, without requiring any new construction, we can effectively consider the recession to be over.
The other leading indicator mentioned was hiring of temporary employees. As businesses start to grow, they begin hiring temporary employees rather than permanent. As the business continues to strengthen they will then start adding permanent employees. Last month was the first month since the recession started over a year ago that temporary hiring has increased. History has shown that when temporary hiring increases three months in a row, the economy has turned and we are out of the recession.
Does all this mean we can anticipate immediate return to prosperity? The answer is no, but like the buds on a barren tree, we can see that things are changing in a positive direction. It means we can begin to change our focus from a protectionist stance to a stance with more forward optimism.
Hopefully, during this past year you've been able to focus your efforts toward solidifying your position and gaining new clients. However, if it has taken all of your efforts and available cash to simply survive, you should cautiously congratulate yourself on your survival and start laying your plans for recovery. Start thinking once again about growth.
The first thing I recommend you consider is how you will be staffing to support the growth of your business. The people in your organization are one of your greatest assets for long-term business success. With any luck, you have been able to hold on to the core of your qualified people, because we are going to be faced with a shortage of skilled people. Certainly, before you consider hiring permanent staff, review your processes and procedures to streamline the manner in which you conduct your business in order to handle your business requirements with the least number of people.
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