Autumn Marathon

Field Notes on the Economy

What I am seeing in the field now:

1. Consensus that this is not a regular recession, but a fundamental economic reset. This is not clear from the “noise” in the US media, but a number of commentators including Microsoft CEO Steve Ballmer have hit the nail on the head.  According to Ballmer, the three important milestones that need to be passed to get to the reset point are 1) de-leverage the economy (i.e., reduce percentage of private debt to GDP which will mean restructuring or writing off loans); 2) restoration of confidence (which requires #1 and that the economic stimulus pass; and 3) a return to growth built on innovation and productivity.
2. Large companies are shedding employees and will continue to do so for at least the first half of the year. As the economy went increasingly sour during 2008, corporations stopped hiring for new positions, but refrained from wholesale cuts until they had “better visibility” into the economic forecast. The big job losses started in November and will continue until companies feel like they are staffed appropriately to the present market opportunities. The job losses started in the US, but seem to be happening even more quickly in emerging markets right now.
3. Smaller firms adapted to the “new” reality more quickly than corporations and are already honing in on the few bright spots out there. Not to say that things are good for SMBs, but they are more agile than their big company brethren. The few interviews and business opportunities I have discussed recently, have been with smaller companies.