Economist: “Two years of opportunity” in economy for manufacturing

Alan Beaulieu addresses the CSIA Executive Conference in Orlando.

05/02/2011


Economist Alan Beaulieu addresses the CSIA Executive Conference in Orlando, Fla.One of the first things economist Alan Beaulieu pointed to in his keynote to the CSIA Executive Conference in Orlando in April was a quote from Time magazine talking about the multiple crises faced by the country—runaway federal debt, a shaky overall economic climate, a weak real estate market, large amounts of personal debt, and spiraling health care costs. Then Beaulieu revealed the Time quote was from 1992.

His point was that no matter how severe a recession seems at the time—and Beaulieu, president of the Institute for Trend Research, called the past one “a manly recession”—we’ve been through this all before.

He sees the same kind of cyclical economy coming for the rest of this decade, but makes one pointed observation about how the recession actually changed the game this time. “Whatever you used to get where you are today,” he said, “how you thrived in the last 10 years is not going to work in the next 10 years.”

Beaulieu told the 400 attendees at the CSIA conference that there is plenty of growth in the market right now, but that the economy won’t sustain the breakneck pace indefinitely. “The economy is cooling off and will continue to cool,” he said. “The economy will continue to expand, but just not at the same pace. Then the economy will speed up in 2012. There will be a mild recession in 2014, but possibly something possible stronger.

“There are two years of opportunity in front of us,” he added. “Most of you, no matter where you are, are seeing pickup in activity. If you asked yourself after this recession, ‘What would I have done differently?’ write it down and put in a drawer, because you’re going to need it again. Try to make a note as to how happy you were in 2007.”

The key, Beaulieu notes, is rapid job creation, but there’s little hope of a rapid return to robust employment. “If we’re creating 200,000 jobs a month, that’s good. As we continue to create jobs, that’s the sign of a healthy economy. We have to create 200,000 jobs a month for 10 years to be the country we were. This is going to be a longer, slower climb than people wanted.

“Those who refuse to get trained are going to be disappointed,” he added. “Those who want the next 10 years to be like last 10 will be disappointed.”

Beaulieu was critical of Fed Chairman Ben Bernacke’s monetary policies, but said anything happening today is simply the end result of a long process. “This problem is bigger than either party. This is a national crisis. Our nation has a budget shortfall of $1.673 trillion. That’s larger than the GDP of Canada. We are in so much trouble, and we’ve known it was coming for a generation and have done nothing about it. This is an American problem.”

He sees two immediate impacts from this problem—higher interest rates and higher taxes. There are also fundamental changes in the banking industry. “Banks are lending again. It takes two to three years to get back to normal. Let me define normal. It’s not going to be where you have a pulse and get a loan. You’re going to need money down to buy a house. I’m not seeing housing coming back until 2014. If you’re looking to get kids out of the house, I suggest you buy them a house.”

With looming inflation in many areas, Beaulieu said business leaders will have to make some fundamental changes. “The bottom line is simple. Number one: Sometime later this year, find a way to raise your prices. Number two: Raise your wage rate. Pay your people more. Inflation is going to make people feel uncomfortable. (In an aside, Beaulieu said, “My staff always asks, ‘Did you tell them about raising wages?’”). Number three: Invest in yourself. Look for process bottlenecks. Ruthlessly. Ask yourself, ‘Can I do something that will enhance my productivity?’”

Yet despite the warning signs, especially on the federal budget and inflation, Beaulieu said he was generally optimistic about the economic future. “I am convinced in my soul we will deal with these issues, and we will find a political decision and business decision,” he said. “Net worth in the household is same as it’s been. We’re the same people we used to be; we’ve just had two huge bubbles. That’s like a great weekend at college. We don’t want bubbles; they’re dangerous. They came from the stock market and housing market.

“Now is the time to be laying the seeds,” Beaulieu added. “And number one is customer service. Surveys indicate only 6% to 8% of clients are happy with the customer service they receive. And 59% of the time, the customer leaves a vendor because of customer service. You have to know what you’re doing right and wrong. You have to know your competitive advantages. What is it that you do that makes you stand apart?”

Beaulieu, an annual presenter at the CSIA event, said his message hasn’t really changed much. “We can see what’s going to happen and we can adjust to it. We can do more than survive.”



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