Dorothy, We’re Not in Kansas Anymore!

If you aren’t convinced that the U.S. economy and demographics aren’t drastically changing before your eyes, here are a few staggering statistics and thoughts that might help you realize we are in the middle of a monumental social and economic transformation:

 

1. In June 2009, the Federal Reserve pegged total U.S. debt at $52.8 trillion. Currently gross domestic product for the U.S. is $14.2 trillion. These two numbers are grossly out of balance. That means we have $3.73 in debt for every dollar of GDP. Our economy simply cannot withstand this for very long.

 

2. Current American employment figures show approximately 131 million people are employed. The last year our economy was at that level was 2000, which means the U.S. has functionally had no net gains in jobs in almost 10 years. Or to put it in the negative, with the REAL U.S. under/unemployment rate nearly 17% (8 million jobs lost in this recession) many families have lost enormous amounts of their net worth

 

3. The value of home prices which are normally the largest assets consumers have, have dropped about 30% since their peak.

 

4. According to the U.S. Census Bureau there are approximately 75 million Americans that will be of retirement age in the next 10 years and only abut 45 million baby boomers to take their place in the workforce. Foreign outsourcing of labor is becoming not only a financial necessity for many businesses, but within the next 10 years it will become necessary just to get certain kinds of jobs done.

 

5. The U.S. economy is currently a consumer driven economy. 75 million baby boomers mentioned on paragraph 2 have been the dominant spending force in our economy since the early 1950s. I believe many baby boomers have seen the light as a result of their nest egg evaporating before their eyes during the last two years. Those boomers simply will not be buying big houses, fast cars and spending their money (and debt) like they have for so many years. In a sudden about face, consumer purchases may decline rapidly as boomers reach their “golden” years.

 

6. Despite a 19% gain in stock prices this year, corporate profits of the S&P 500 have dropped 30% from their peak and are currently lower then the were ten years ago.

 

7. The value of commercial real estate has dropped nearly 39% since its peak and industrial production has dropped 13.3% in the last 20 months. The U.S. economy hasn’t seen these types of sharp drops since post WWII.

 

If you aren’t thinking of ways for your business to do things differently and be one of the survivors of this recession, this post should be a wake up call for you. Don’t expect this recession to end easily or quickly. Things aren’t simply going to be like they were five years ago.

Sam Thacker is a partner in Austin Texas based Business Finance Solutions.

You may contact Sam directly at: sam@lesliethacker.com

or follow him on Twitter: SMBfinance

 

EXTRA: If you have questions for Sam regarding business financing, the credit market, and similar issues, please send an e-mail. Your questions will be recorded and Sam will answer the best ones in his Ask the Expert podcast show.