Published: June 22, 2009 03:06 pm      

ECONOMY: Unemployment figures show signs for cautious optimism

Job losses during the ongoing recession have been some of the highest experienced for quite some time.

The Business Source region has not been immune to layoffs, and the area saw its unemployment rate climb to double digits during the last quarter of 2008.

New claims for unemployment insurance appear to have peaked between December 2008 and January 2009, and have been on a downward spiral since, while continuing claims went on to increase later into the year.

The good news: Continuing claims also now appear to also be on a downward trend that should bode well for the region’s unemployment rate. As continuing claims maintain that trend, the region’s unemployment rate should also begin to show a gradual decline. We see this happening in April: March unemployment was at 10.4 percent, while April declined to 9.7 percent (see graph on page 19).

Optimistically, declining rates for unemployment will positively impact housing, retail, and leisure and hospitality areas.

As unemployment declines, so too should the incidence of home foreclosure. Retail sales will benefit as workers feel more secure in their jobs and slowly begin making previously postponed purchases. The leisure and hospitality industries will benefit as workers begin to resume some of their discretionary leisure spending.

We say this with a bit of caution, however. Even if the unemployment rate does continue to decline, trepidacious consumers will likely begin to exercise a bit more frugality. As consumers adjust their spending habits, it will take some time to resume the level of production necessary for the “new normal” in automobile sales, durable goods and other categories of consumer spending. This will place added pressure on the retail area as well as on leisure and hospitality.

A wildcard for unemployment in the region is the bankruptcy of General Motors; any bankruptcy could contribute to additional job losses. Another cautionary note is the possibility of a sustained higher rate of unemployment going forward. While the unemployment rate may decline from current levels, we will likely not see rates in the 4 percent to 5 percent range again for quite some time, if ever.

Businesses would do well to adjust their business strategy to capitalize on this shift in consumer trends.

EXPANDING MARKETS

A recent flight through Atlanta made for some interesting conversation with a fellow passenger on the plane.

It started with the usual, “Where are you headed?”

“Northwest Regional in Arkansas,” came the answer, in an Australian accent.

My seatmate had traveled near 9,000 miles from Australia to buy berry plants in northwest Arkansas.

That a traveler would journey such a distance to buy berry plants tells us something about the importance of global trade and the presence of economic opportunity beyond our regular business confines. Even though the Australian berry buyer’s trading partner may not directly be motivated by the recession, the instance does compel one to think about ways to expand our markets and think beyond our company’s traditional customer base, regardless of the geography.

Retrenchment during recessions is often the norm rather than the exception. But recessionary retrenchment is also cause to pursue opportunities that are consistently placed on the back burner.

The excuse?

We are too busy and comfortable to drive innovation and pursue new opportunities in normal times.

Since the theme of this issue is resiliency during a recession, we’ll share a few ideas.

Customer service. Customer service management is one important key to success. Excellent service, especially for locally owned enterprises, is always important, but especially so in allowing you to retain customers during a time of lower competitor prices.

I recently had an experience with a telephone company that was soliciting my business. Despite my willingness to switch over to this company’s plan, the representative actually made that difficult to happen because of poor service during our interchange.

So the lesson here is to welcome a new customer, especially when that customer wants to give you his money.

As obvious as it may seem, this happens more often than not, and the guilty are usually oblivious or suffer from the proverbial “failing to look in the mirror” syndrome.

Out with the bad, in with the good. All of us have “To Do” lists. Perhaps more important, recessions should compel businesses to formulate “Don’t Do” lists. Sometimes simply stopping a process or practice can lead to a stronger, sustainable enterprise.

Take a hard look at those practices that you have always wanted to change, but in comfortable times never had to address.

Added value through information. In searching for new opportunities and customers, think about ways to add value to your customer’s experience even if dollars don’t change hands. The emphasis here is on information.

Help facilitate the dissemination of valuable information to your customers. The Internet can not only generate additional sales but it can also be an important tool in providing your customers with key information about products, about your industry, about available services and more.

There is a Google-illion amount of information available on the Internet. Help your customers navigate this complex web of data. They might remember you as a result.

There is no question that any recession is going to present challenges to any business. On the plus side, recessions may force you to make the tough decisions you have been postponing, seek opportunities and markets you may have avoided in the past, and think about tools such as the Internet that allow you to offer enhanced value to the all-important customer.

Uric Dufrene, Ph.D., holds the Sanders Chair in Business at the School of Business at Indiana University Southeast in New Albany. The former dean of the school, Dufrene conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels. He previously served as dean of the School of Business.