Posted: October 01, 2009
Rundles Wrap Up: Lather. Rinse…..
Can we afford to repeat?Jeff Rundles
By many accounts, the Great Recession is either over, or "may be over," or soon will be over, or we are on the verge of an economic rebound. The Dow is on a relatively upward swing, housing has stabilized, retailers have reported lower losses, and a story in mid-September said the nation's banks are showing signs of taking on more risk, although I'm skeptical.
About the only true economic indicator that still looks very bad is employment, and, of course, that would always be the last thing to rebound.
We all knew the recession would end sometime, and we can debate the timing, but that is all economic mumbo-jumbo. No one in any kind of authority even said we were in a recession until months after it apparently started, and I am not sure they are reading the tea leaves correctly this time. About the only thing I am dead positive about is that economists are good at 20/20 hindsight.
But whether the Great Recession is over is not the most interesting aspect of recent economic developments. The real question is "What will the rebound or the end of the recession look like?" If anyone thinks it will simply be a return to the economy of the past 16 years or so, think again. Something tells me we've had a real economic paradigm shift these last two years and that the "recovery" won't be a return to anything, but rather an arrival into an unfamiliar place.
Take automobiles, for instance. In the 1970s and once in the 1980s when we experienced gas shortages and sudden higher prices, we flirted for a moment with smaller cars, then returned to our big-is-better binge. Not going to happen this time.
What's different now is that the car companies, foreign and domestic, are simply slashing their ability to make SUVs, trucks and bigger cars, and are all gearing up big time for smaller cars and every sort of energy efficiency they can come up with. Also on this front, people will be keeping their cars longer. The go-go days of 17 million cars sold per year are gone; 11 million will be the new good year.
How about retail? The nation's retailers have been on a sort of economical tear for several years, the Wal-Mart era if you will, but it never before really put a dent on the high end. That's over. Everyone, the rich and the used-to-be-rich, have joined the rest of the population in bargain hunting, and with the Internet taking an ever-greater share of the retail dollar, the only retailers that will survive from now on will feature bargains.
Real estate? I think I can safely predict that the mini-mansion era is officially over. Call it carbon footprint or economy or, as I saw recently, the value shift to spending-time-with-family is more important than keeping-up-with-the-Joneses. People are going to stay put longer, and they won't be making any quantum leaps when they do move. Mortgage lending will be tighter now forever, so the new real estate dance is going to be slower.
Travel? Fewer, shorter trips, bargain hunting.
Business travel? Fewer trips, shorter durations, more coach, more Motel 6.
And banking? So many people I know, for personal banking and business banking, are discovering the difference between a lender and a banker. Interest rates are on the rise, credit cards are being cancelled or severely curtailed, lines of credit are disappearing, and nearly everyone is describing their banker as "unfeeling," "unrealistic" or just plain "mean." Welcome to the new reality; lenders are nice, bankers are "cautious."
Everywhere you look, the landscape of America is going to be different. Some of it good - less consumption - and some of it not so good - less leisure. People are going to work harder, retire later, make less money, eat out less often, and do everything less extravagantly.
Here's a snapshot of what life is going to be like once the Great Recession is over: On the back of every shampoo bottle it will now say "Lather. Rinse."
We can't afford to repeat the sins of the past.
Jeff Rundles is a former editor of ColoradoBiz and a regular columnist. Email him at firstname.lastname@example.org.