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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 3 of 5)
I'm a small business owner and I'm forced to keep raising my rates because the cost of running my business keeps going up! Only problem people are not making enough money to afford my services. Yes I'm called expensive but it's $3.90 for a gallon of gas cost me $16.95 to get a $5.00 part shipped and my Insurance is threw the roof.
I'm not rich I'm poorer than the people on Welfare. I can't afford cable TV have to grow a garden because food prices are insane. Who am I? I'm a Small business owner.
We are f'd...bottom line ! Until, we renew manufacturing jobs, there is no way out of this mess. Bring our troops home ( we got Bin Laden) ! Tighten our borders AND STOP BUYING SHODDY CHINESE PRODUCTS !
The 1930 Depression should have taught us how to recover in the sense of getting people back to work. I am 58 this month I remember my father telling me that at that time, the depression, the President started civilian conservation camps . I believe thats was the logo , however, I could be wrong. People were placed building roads, and other civil chores in order to get them back to work. Now in 2011, that can never happen , Unions are great for works, however the unions would never permit non union workers from building the roads of today unless it was done by union workers. Its kind of a catch 22 situation we have presently. Obama, is terrible inept as a president. You still have people believe it or not who still blame Bush for our problems and then they say, "it would take Obama more than four years to correct Bushes mistakes as a president .GET REAL, Obama has had enough time to start making this economy work. What happened to Obama mirical Health cvare reform Give me a break. If the job of Prtesident of the U.S was determined as we consider those seeking various jobs based upon qualifications to do the job thenn a determination was made if the applicant had the qualifications to undertake the job , the same criterior should be used to select our leaders. Obama if it was not for racial overtones nor vast amounts of liberals seeking a new beginning kind of like a Utopia, Obama would have never been elected. , he would not have became our President.
The state of the United States of America has finally boiled down to a point where 100% of our elected officials in Washington have only one mission: paying ransom to the special interests that provided the cash that got them elected the last time. The Congress and the President are in effect paying protection money to the mob, the cartel, or any group willing to slip them bundles of greenbacks. They have joined the cons in treating the taxpayers as marks and suckers. They could care less about our economy...they only care about their own.
The rich pay most of the taxes so enough of this crap! Further, the rich are employers! So, further taxation will create more unemployment! Duh!
I sure hope you're wrong. Unfortunately,you may not be and I've thought about the same thing. Maybe credit (which drives this economy) is now at it's best.
I don't know what all of you are compaing about.. WE HAVE RECOVERED.. This is it...get use to it. The old days are gone and we are not going back to it....WE HAVE RECOVERED...
Exceed 18 % of GDP in DEBT and go into the Toilet............very old information, but America's Politicians seem to defy TRUTH, a sign of
fatal VANITY !
So now John Doe gets poor and insecure, inspite of Angry Voters !
All Paper Federal Currencies Fail...........without exception !
Tea Party appears to understand all this.........hope they say "No" !
WELL LET,S ALL SPEND 43% MORE THEN WE TAKE IN.THAT,S WHAT THE FEDERAL GOV,T DOES.LET US BLAME THE RICH,THE POOR ,THE DEVIL AND MAYBE GOD.LET.S MAKE CUTS BUT NOT IN MY BACK YARD,NO MEDICARE,NO SOC .SECURITY.NO FOOD STAMPS,NO MILITARY,NO NO NO.WE CAN RATIONALIZE ANY POSITION ?WHERE ARE THE POLITICIANS THAT WILL PUT OUR COUNTRY FIRST? THEY MUST BE IN GREECE...RON
Get creative and find other ways to get ahead. I am making more money now than I ever have. I had to shift gears and see what new opportunities the new economy had to offer. I will tell you that if you are a small business owner that it is pretty much impossible to survive in this economy. Between the government taxes which are the biggest scam in this planet, insurance premiums, ungrateful employees looking to sue and scam you every way they can...and then of course crime! Small business has become a slave to collecting sales tax and every other tax imaginable for the goverment to spend on fancy trips for Michelle and the girls!
Dont tell me that they just find out that we are in a double dip recession , has been and will be in as long as this administration handles our economy
This article is quite correct. I own a small business. The new healthcare bill and economic uncertainty had me rethink my business. I reduced my workforce by 2 people now I only have 4. I decided until this economy turns around to be safe and keep 4 families fed instead of feeding 6 and possibly losing it all and keep no families fed.
This article is quite correct. I own a small business. The new healthcare bill and economic uncertainty had me rethink my business. I reduced my workforce by 2 people now I only have 4. I decided until this economy turns around to be safe and keep 4 families fed instead of feeding 6 and possibly losing it all and keep no families fed.
President Obama wants to send back our boys from Afghanistan. Democrats and Republicans do NOT want.
President Obama wants to legalize immigrants. Republicans and some Dems do NOT want.
What we need is a NEW THIRD PARTY. No more Reps and no more Dems.
I don't see other way.
And CLOSE SENATE. We don't need them. Important European countries do not have Senators. Save money.
They're having a segment on Fox right now, about how the WH interfered with GM after the bail out, and they said Geithner may have helped non-union members lose their pensions. If that's true, how do they get away with that stuff?
Our government is like one long repeatetive hip hop song repeating the same word over and over again: LAW LAW LAW LAW LAW LAW LAW LAW LAWLAW lala la la LAW and Keep on going for every law in america, you sing law for every law and you will still be singing into your next birthday. Free country if you dont get caught doing something illegal, that you did not think was illegal. Then we can sing an old fassion song called jail break.
You cannot kep up with unreasonable and extorsionist demands.
"Britain has joined Germany and France to demand an end to the notorious Brussels "gravy train" of lavish pensions, perks and automatic, above inflation pay rises for Eurocrats".
Unions are finished in Greece or they will starve. You cannot take, take, take out of the pot of gold.
Your name is an oxy-moron. Here are some facts (you will no doubt deny). Democrats controlled Congress during the last 6 years. Bush went before Congress 18 times about the loans being made under the control of Barney Frank and company to no avail. You have a Democratic President and still control the senate. Still all people like you can do is blame George Bush. Your President has spent more money in two years than all Presidents before him combined. We can't reason with your kind, but we sure can defeat you at the polls!
Two wars-unpaid for by taxes. Prescription drug plan -unpaid for by taxes .Banks making and packaging loans they knew could never be paid back. Tax cuts slammed through by Republicans. Give me a break.
Do you things would be any different under McCain.
Obama inherited a mess and 95% of all economists( both conservative and liberal) recommended the present course of action. No matter who is running the country this situation could not be fixed soon.
Now we have a new challenge coming: raising the debt ceiling. Most economists and Wall Street executives know that our deficit will not be solved by spending cuts alone (which, by the way, will raise the unemployment rate within month or two). It must be a combination of sensible cuts across the board and tax increases.
If Cantor and all Republicans stand their ground on no tax hikes by ignoring the obvious and nothing is passed we sill default on the debt and will experience conditions that to many of us are presently unimaginable. I hope everyone here is thinking about what to do with their 401K's because the market in general will be heading south big time unless we come to our senses
As for all that hate regulations let's make sure that the banks are not reeled in, nor are the Wall Street investment firms who helped create this mess. Let's make sure that our air and water get fouled by killing the EPA and its regulations. Let's also loosen the regulations on the FDA so our food production processes will be monitored less.( So what if our kids and parents get sick.) There are lobbyists trying to change all of these things as we speak in the name of "less regulation" I would agree that some regulations impede business and just overstep their boundaries, but taking extreme views on killing regulatioins that make sense for all of us is just insane. Yet that is happening
In the end these economic problems are enormously complex and there is no single answer or silver bullet.
For example, no matter what there are over two million homes in foreclosure and it will take years for the courts to work out each situation In the meantime our homes will continue to lose value.
.We all want simple answers or we all want to blame one person. If we can't approach this rationally and ignore extreme right and left points of view we are all screwed.
Liz said, "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." Her thoughts are benevolent, but, the problem is that none of those things are "rights". They are things we should work for. Nothing in the Constitution guarantees us fair pay, or decent working hours, or vacation or sick leave. Yes, Medicare and Medicaid have become pseudo-rights, and Obama is trying to make healthcare a right with socialized medicine (something that has never worked well anywhere in the world). But, Liz, nanny states don't work. They only create vast masses of poor, and dictatorships. We have the right to "life, liberty and the pursuit of happiness". Don't translate that into we have the right to "happiness".