Of all the talk about this recession, there’s one question, of course, that no one can really answer: When will it end? But the most important question to our businesses right now may be: Has it already ended? The answer to that, according to a news report I read last night, might surprise you.
Some experts believe that our economy at large may have already begun the recovery. Take, for instance, that the stock market has been quietly recovering since plummeting so furiously in the early months of 2009. The Standard & Poor’s 500 Index, in fact, has erased its 2009 loss (as of its close yesterday), climbing more than 34 percent since March 9, and the Dow Jones Industrial is up some 28 percent in the same timeframe.
Yesterday’s gains were driven by positive news in the housing market – pending U.S. home sales rose more than expected for a second straight month of gains, and construction spending rose in March after five months of declines – but analysts suggest that it could dip again if this Thursday’s news of the government’s “stress tests” on banks and the monthly employment data, due out Friday, are negative.
This type of fluctuation in the market could be indicative of a recovering economy. In fact, Federal Reserve Chief Ben Bernanke told Congress that the economy should start growing again later this year, while warning that even after a recovery begins, the economy will still show signs of weakness.
That type of warning isn’t a surprise to savvy investors. In fact, they expect it because they know that, just like it took us a while to realize that we were in a recession, it will take us while before we understand that we’re growing out of it.
Think about it from the marine industry’s standpoint. Sales began falling off in late 2004, yet we kept building boats as though there were no negative indicators. Now our overproduction – on both ends of the supply chain – has many marine businesses reeling. Soon, though, many people believe, we could be faced with a situation where the demand for boats is greater than what we have available on showroom floors.
In his book “Ahead of the Curve,” author Joseph H. Ellis explains that these are normal cycles of our economy. And that it’s normal for our businesses to continue manufacturing product after gains in consumer purchasing have diminished. Likewise, it’s typical that companies continue laying off employees even after they have begun their rebound.
Normal, but one could argue, not practical. In the book, Ellis, a leading retailing analyst, argues that if you have this information at your fingertips, you can make more educated decisions about your business. You can watch trends in leading indicators to suggest when you should slow production or begin hiring employees again.
The book is a good one, and I highly recommend it. Admittedly, as a journalist, I’m not great with numbers, and I’m certainly no economist. But the book’s theories, which are backed by years and years of factual data, suggest that, while we may not be able to predict exactly when the recession will end, we will gain better insight into leading indicators that can help us react better once it does end.