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Are We Headed for a Double-Dip Recession?
Whether they choose to slap an official label on it or not, our usually bullish Board of Directors has some serious concerns about the economy. So is the worst really over?
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From Wall Street to Main Street to the presidential campaign trail, fears about the economy show no signs of abating -- and may actually be growing stronger. The unemployment rate still stubbornly tops 9 percent, consumer confidence is sliding and even the seemingly gravity-defying stock market has stumbled a bit in recent months. After an economic meltdown so dramatic that it inspired Hollywood movies both fictional (Wall Street: Money Never Sleeps) and based on real-life events (Too Big to Fail), clearly we were going to need some time to dig out of the deep proverbial hole.But two years have passed since the worst was supposedly over, and while we have certainly seen a few signs of life since then, the good times aren't exactly rolling just yet. And now, the threat of a "double-dip" recession is real enough that we're at least talking about it. (For all you lay people out there, a double-dipper is pretty much just what it sounds like -- broadly defined as a recession followed by a short-lived recovery, followed by another recession. The last one is generally considered to have occurred in the early 1980s.)
During the so-called Great Recession of the past few years, many small-business owners were forced to cut costs and cut staff, and have largely come to realize since then that they can simply do more with less, whether they want to or not. They're showing flashes of optimism -- as entrepreneurs, you'd expect nothing less from them -- but many continue to have serious questions about the economy and the overall direction of the country, which explains, for example, a jump in hiring temporary workers rather than full-time employees. And as every politician loves to remind us, small-business owners are the real "job creators" in the United States, so if they're skittish, we have a bit of a problem.
The members of our Board of Directors hail from a variety of industries and locales and generally have their collective hands on the pulse of the U.S. economy. So who better to ask about where we might be headed?
Ken Yancy
CEO, SCORE
"Based on the survey results that I have reviewed from a number of the groups that represent small business, few small-business owners believe that there has been any improvement in the economy, despite what we might have read in the news in past months. Recent economic reports are more consistent with the sentiment of small-business owners. Issues like the future of gas prices, federal and state budget deficits, related tax concerns, and access to capital and debt for small business have clearly impacted the small-business sector's contribution to a recovery. I don't believe that we will have a double dip, but I also don't believe that there will be real improvement until entrepreneurs and small-business owners are confident enough to take the risks necessary to start, expand and grow. Despite the overall low level of small-business owner confidence reported by the surveyors, many determined entrepreneurs are continuing to start and grow very successful businesses. We need that number to grow."
Phil Town
Investor and Author of Rule #1 and Payback Time
"I think we're in the Stagflation Zone. We'll stagger from recession to barely out of it and all the while the value of our currency will decline against the yuan, the Swiss franc and gold. We will see gas at $10 per gallon within 10 years, $15 a gallon within 20. Unemployment will remain high. We added 500,000 jobs since May, 2010 but 90 percent of those came from temp agencies. The federal government has been piling on regulations, union issues, taxes and health insurance costs and entrepreneurs are not willing to risk permanent hires.
"The decisions of the current administration to elevate unions, encourage regulation and protect Wall Street and mega-corporations have left the vital small business engine without fuel. As you saw from her answers to our questions, the head of the SBA is clueless or powerless -- or both. There is no voice in this administration for the little guy who runs a business that provides jobs, but a lot of voices for the little guy who doesn't want one.
"There is no way that our small businesses can continue to grow the working wages of our employees with handicaps piled on by regulation, taxation, unionization, medication and general government obfuscation in a world with a China and an India in it scratching to get to the top. We either keep going down this road to ruin in the name of 'fairness' and 'equal opportunity' or we get back to the basics of freedom, liberty and hard work epitomized by small businesses that made America a great and wealthy nation."
Elizabeth Busch, Anne Frey-Mott, and Beckie Jankiewicz
Co-Founders, The Event Studio
"I don't think we're headed for double-dip recession, but I do think we all need to be realistic and realize that we're never going back to the way things were. 'Recovery' will look like the current climate, just more robust -- where businesses are operating cautiously but still focused on growth and moving forward. Oustized budgets and irrational profits are gone. And that's a good thing."
Tate Chalk
Founder and CEO, Nfinity
"Are we headed for a double-dipper? At this point, I am not sure how we are going to avoid it. The housing market hasn't even hit bottom yet and we are set up for Round 2 -- that being loans for homes over $417,000 or 'jumbo loans.' When these loans were taken out in pre-meltdown times, you could get this kind of loan for zero down on an interest-only adjustable rate mortgage. Which was fantastic for the consumer. Interest rates were low and real-estate prices were going up.
"Fast-forward five years and these same loans (which are adjustable rate, remember) are starting to mature. That means possible refinancing. But now, with more strict banking standards, you need 30 percent equity in your home to refinance. With an interest-only loan and property values down 20 percent, how are you supposed to have 30 percent equity in the home? You can't. So you have to show up to the closing with $125,100, plus closing costs. How many people have that kind of cash lying around? The alternative is to keep the ARM and cross your fingers and hope for the best. Now, ARMs work fantastic as long as interest rates are relatively low -- but what if they go up? What if the U.S. government is injecting money into the economy without creating real value? When you print money, the only thing that can happen is inflation. So the dollar buys less. And the only way to battle inflation is the pull money out of the economy, and this will cause interest rates to rise. Remember, what would happen to this ARM when interest rates are high? Bad.
"A majority of these 'richest Americans' we have been hearing so much about are small-business owners who probably have one of these 'jumbo loans' with ARMs which, as these interest rates start to rise, are going to be forced to refinance or lose their homes. If they have to refinance under these new strict banking laws, where do you think they are going to pull the cash out of to keep from losing their home? Their small businesses. What other things do you think they could be doing with that $125,100? Oh I don't know -- paying employees maybe, creating jobs. Rather than having to eliminate them because their cash is otherwise engaged. So I am not sure that this is enough to make the economy double dip, but I do remember as a kid that the one thing you did not want to get was a 'relapse' of the flu. It was always 10 times worse the second time around."
Jennifer Hill
Chairwoman, Astia NYC Advisory Board
"There's a distinct possibility of this occurring -- but the specific triggers and timing are unclear. With the rolloff of the economic stimulus in the United States, overheating issues in some of the BRICs [Brazil, Russia, India and China], the political uncertainty in Middle East and the euro debt crisis (to name a few) plenty of issues could trip the global and the U.S. economies. What's more interesting is that if there is double-dip recession, how will the United States rebound? How quickly? What have we learned to pull out faster and more effectively, so that our standards of living can continue, in the long run, to prosper?" (For some of the relevant lessons learned in the last two years, click here.)
Bob Parsons
Founder and CEO, The Go Daddy Group
"Our economy is in a deep hole that is going to take time to dig our way out of. There are going to be setbacks along the way. That's tough when you are trying to make a business go. Compounding the problem, consumers are worried about where America is heading, so they continue to cut back on spending.
" It would definitely help if the U.S. tax structure was changed to give businesses money to promote investment and innovation here at home.
" It would definitely help if gas prices went down -- and stayed down.
"And by all means, it would definitely help if our government addressed the federal deficit -- now! Our federal bureaucracy needs to shrink, yet it continues to grow. Our economic problems are legion and quite simply they are not being dealt with, so another recession could be on its way.
"Still and all, the Internet has been a bright spot through the recession. I've always said the Internet is the heart of the new economy. Here at Go Daddy we are filling jobs, investing in the business and growing by double digits, so it's not all 'gloom and doom.'"
Rieva Lesonsky
CEO, GrowBiz Media
"I don't think there will be an 'official' double-dip recession. But we certainly have to do more to raise public confidence in the wobbly economy. If Congress would stop posturing and start working together to strengthen the country, that would certainly help."
Clint Greenleaf
Founder and CEO, Greenleaf Book Group
"It's either a double dip -- or the slowest recovery in history. Fits and starts are common in any recovery, so it's hard to tell. Best advice is to protect cash, hire smart and focus on smart growth."
Comments (Page 1 of 5)
LOOKS BAD OBIES MADE ANOTHER DECISION WILL COST US PLENTY
How soon we forget, cutting taxes essentially for the rent, making tax breaks that are for the rich, fighting two wars, making ARM loans to people that couldn't afford them (not rich small business owners, but working class people, not enforcing government regulations on big businesses, tax breaks to oil companies that make billions, just to name a few. But now, unions, medicaid, medicare, all the things that help regular folk want to be called out as the culprit. Don't fall again for the hype. Try to remember how you got here and who is really paying for it certainly not those who could most afford to.
Ditto guy. and let's stop all this Giving away the House to The Poor and Lower Income people
They Became Poor For a Reason! Is it the rest of us, who worked smarter and harder to Take care of them?
and what's with this giving ANYTHING to These Illegals? Why is it Our Job to pay to Feed and House them? To pay to Educate them? Pay for their Bkfts. and Lunches In School? What, they can't make a Simple Sandwhich and have a Bananna, like we kids did? Are theyt That helpless?
That Free Bkfst and Lunch at schools is just another Scam to create more jobs.. Another Socialistic Con Game..
People need to Go Bankrupt and live Poor for awhile, That way they will Remember and Never be that way again.. That's the way I and my friends Learned.. We then Worked 12-16 hrs a day , 7 days a week at whatever jobs we could get.. and we made it.. If you too damn lazy to do that? Then Go Live in Canada or Europe..We don't Want your kind here!
Do you really think what is going on in this country is about the poor? It's about average working folk. It's about your rights to fair pay, decent working hours, family leave, sick leave. The right to receive health care (Medicare, Medicaid)when you most need it and the disabled and elderly all benefit from these tax dollars that we pay into the federal government. Our economy did not get in this condition because of the poor.
I agree completely with Joe. However, besides working hard and not giving away everything to those who refefuse to, don't just complain or send emails that go nowhere...VOTE OBAMA OUT!!!!
Obama is definitely a Socialist (in his own words) and collapsing the economy is his real goal and to turn our government into a Socialist state - do your homework. Watch what he does, not what he says. example: Halts U.S. oil drilling and production in the Gulf of Mexico while at the same time giving Brazil billions of dollars to drill for oil and promises that the U.S. will be it's biggest customer. First oil rig to leave the U.S. went to - - - - - Brazil.
Are u kidding? Who had the money to "loan" to begin with? Surely not the poor or the sick or disabled...grow up and think straight. Rules and regulations count and they were not in place or not followed. If you follow the rules and get screwed who is at fault? Get off your "bully wannabe pulpit" and get real!
Double dip recession to the rich is ; more stimulus money to help us through so we still make that 3% every quarter .
What is interesting in all this = No one seems to get it. The restraints for new technology, engineering, business in general that would support new growth and international trade are hampers with: Excessive fee's to conduct business, excessive regulations, licensing, excessive oversight by government agencies, excessive taxes on small business = Excessive costs to conduct business that are out of sight. So, no wonder there are those who have chosen to move off-shore and to emerging countries that still function wihtout excessive costs to conduct business.
They are right things are getting worse. people either do not have the money to spend or are too afraid to spend. Yesterday a friend came to the store and we started talking about how slow things are at the new jersey shore. he stated he has a few rental properties and up to this summer things were not so bad. He was happy to get vacationers to rent for 8 to 10 weeks of the summer. this year he only has reservations for 2 weeks so far.it was the same way for the campsite we have a seasonal property in. memorial day weekend was the worse I have seen in 5 years. They have 435 camping sites that are usually fully rented during holiday weekends. This memorial day they only had 123 reservations . It looked like a ghost town.
gas prices, health care plan, ethanol subsidies, printing more money, more federal jobs added, filling positions with unqualified people, favoring unions over small businesses, more regulations, more federal revenues added in bills passed, this all looks like a designed plan to crash our economy to me. all these things were allowed to happen with pelosi and reid in the majority and obama at the helm. now either it was a designed plan or a stupid plan, either way, all three of these people need to be out of office as soon as possible.
what are these troops going to do for jobs,a lot of them are reservist and contrary to popular belief nthey were not born in the money tree. A lot of reservist are there for one reason and that is money ,as soon as they get home that stops,their family insurance stops,everything stops,their protection on their home loans.
We have the inalienable right to choose double dip inflation. We say we do not want strife, when all the time strife is all that is upon our mind. We are thinking we will have double dip inflation and with this thought we must realize it is our choice that is guiding us.
Double Dip Recession. Sorry friends we are in a Depression now. As soon as the banks failed and it is only getting worse with OBAMA and the Liberal News and these phoney stories.
First we need to bring all our troops home. The money we spend on all the bases and wars has to stop for the good of you and your children. It is time to think about the future and not a party.
China has no bases and is involved in no wars. The CPC has decreased in size and has become more and more Capitalist¬ic.
What we have is Americans that can not get beyond being a Democrats or being a Republican¬. They can not separate the good from the bad in each party. 429,000 New faces on the new unemployme¬nt claim line this week. The president said it is a blip. Every economic indication today was bad. Our nation’s dept has exploded from 40% to 70%. What a mess.
OBAMA is a nice average person that cares nothing about you or your family only his job and his family and his Job in 2012. Look at the Job numbers above again. Just published today. It is insulting when OBAMA talks about economy. Under his plans unemployme¬nt is going up and the Economy is in a Depression¬. It is time to face the truth. This man will continue to grow government and has no solutions except to spend the root cause of the problem today.
Not sure I would want to even take the job after the mess OBAMA has done so far!!
what are y'all taking about? we are in a depression.... look at the numbers... oh, wait, you can';t because aol huff po doesn't write articles about obamas performance for the week (that's right, it comes out weekly) almost 14,000,000 Americans out of work
For all of you deregulators and cut tax people those are the policies that got us in this mess. Even the creator of trickle down has disavoed his own policy.
What a Joke. What lies. The economy is already in a big D. It began when OBAMA took over and the banks defalted.
First we need to bring all our troops home. The money we spend on all the bases and wars has to stop for the good of you and your children. It is time to think about the future and not a party.
China has no bases and is involved in no wars. The CPC has decreased in size and has become more and more Capitalist¬ic.
What we have is Americans that can not get beyond being a Democrats or being a Republican¬. They can not separate the good from the bad in each party. 429,000 New faces on the new unemployme¬nt claim line this week. The president said it is a blip. Every economic indication today was bad. Our nation’s dept has exploded from 40% to 70%. What a mess.
OBAMA is a nice average person that cares nothing about you or your family only his job and his family and his Job in 2012. Look at the Job numbers above again. Just published today. It is insulting when OBAMA talks about economy. Under his plans unemployme¬nt is going up and the Economy is in a Depression¬. It is time to face the truth. This man will continue to grow government and has no solutions except to spend the root cause of the problem today.
Not sure I would want to even take the job after the mess OBAMA has done so far!!
And why do you suppose those manufacturers are moving out? It is because we have chased them away with over regulation and taxes from our government and high labor costs and outrageous pention requirements from our unions. As a business owner, I can tell you that we all have our businesses running in survival mode with all hatches battenned down waiting for hurricane Barry to just blow itself out. When he is gone then we will have to rebuild from all the destruction he has caused. If you want to find the root of this mess, blame Fannie Mae and Freddie Mac for backing 100% home loans and no income verification loans to those that had no ability to pay a mortgage. Fannie and Freddie were allowed to operate above and beyond the basic economic safety measures that all other banks are required to use. And when these blatant violations were exposed by an oversight board and the impending financial crisis was predicted in 2006, the Democrat controlled housing committee denounced it as a racist attack on Franklin Raines, head of Fannie and Freddie. By the way Franklin Raines walked away with tens of millions from that job and is Obamas economic adviser. The only way out of this mess is to get rid of Obama, Obamacare and eliminate all the new branches and departments of government that are holding thier regulatory boots on the neck of the private sector.
Making products SOLD in the US subject to the same constraints as products MADE in the US is the only sure way to job creation for the United States.
There is no amount of technology that can overcome $14.00 a day wages in effect for many offshore products sold in the US. Add to the unrestricted low wages, the absence of Worker Comp, Social Security and Medicare payments, Environmental restrictions and OSHA regulations, there is no way the US can generate jobs. Almost anything used in the US can be made cheaper in offshore developing countries due to lack of the same rules that inflate production costs of US producers.
There is no amount of tax reduction for US manufacturers that will make up for the above advantages of offshore products.
Many of our fiscal problems, aside from runaway entitlements, are due to the lack of domestic manufacturing with the taxes and the economic stimulus that payrolls provide.
We must level the playing field if the US is ever to create a significant number of jobs again. Many Lawmakers and Economist say that tariffs on offshore production are counterproductive. Yet these same people put tariffs on domestic US production in the form of the above mentioned constraints. They certainly are right that such tariffs are counterproductive to domestic US Production. In fact, such tariffs have just about ruined the US Economy.
If there are some US citizens that think it would be foolish to pay more for the products that can be made cheaper by offshore producers, take a look at the loss of home values and 401Ks. Add these amounts to the cheap imports you think were bargain prices.
If developing countries were subject to just the US Federal Minimum wage, it would cause the creation of a middle class in such countries. In many ways, making products SOLD in the US live by the same rules as products made in the US is a win-win situation.
Sincerely,
Edmund Avolio
And yet they are trying to implement more so-called "free" trade agreements, with Columbia, Korea and Panama. (There were 51 murders of labor leaders/organizers in Columbia last year alone.) Until we stop this practice of outsourcing our manufacturing, our customer service, our banking, etc., we will continue this downward spiral. A nation is only as strong as it's manufacturing base. It's a real no-brainer.