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Jul 8, 201312:32 PMMad @ Mgmt

with Walter Simson

The economy in three clients

(page 1 of 2)

I have been gratified to receive a number of inquiries. “Where’s your blog?” The truth is that I received an offer to write a business article for a print magazine, which would have caused a conflict. Then the offer … went nowhere.

I have made an executive decision. To heck with quality journalism. I’m gonna keep writing for you guys.

So I thought we could begin the summer with a review of the mixed economic picture.

For those who work better with pictures, I recommend the Wonkblog (great economic news), courtesy of The Washington Post. I like its midyear chart report. An update was also added recently.

Here is some anecdotal evidence, courtesy of my clients, present and former. (I am in the business of restoring profitability to middle-market companies. For obvious reasons, I will not give too much detail, unless the identity of the client is public record via bankruptcy records or the like.)

This post will be organized by client, much as Tom Standage’s A History of the World in 6 Glasses covered all of human history. (His six glasses contained beer, wine, coffee, tea, brandy, and Coke. If you are willing to overlook 7UP, it’s a pretty complete picture.)

Client 1. The consumer: At a retail oil-change company with operations in five states, we saw a remarkable trend that, I am told, dates to the advent of the crash: At the end of each month, sales drop off dramatically. Store managers believe that it is the end-of-month effect due to reliance on government checks for unemployment, food stamps, and Social Security. People apparently feel that, with funds running low at the end of the month, taking care of the car can be deferred.

This is a comment on the middle to lower end of the consumer market, because no one has ever reported a Bentley going through a corner oil-change place. And it is understandable: After all, total employment, while improving, has not reached the levels of 2008. (See the total nonfarm payroll chart, above.)

Until it does, it appears there may be continuing reliance on government income supplements. With a gap of about 2 million jobs between current levels and 2008, will this consumer segment be weak for another year? Or two? Or five, as Paul Krugman says?

Client 2. Durable goods: An equipment dealer I know had been through a multiyear rough patch. After restoring profitability, the owners put the company up for sale and were relieved to receive good offers.

However, I recently learned that the sale was off. Why?

“Business is good and we are having fun again!” Fun? In heavy equipment? This is something we have not heard in years. I called my wife, who is passionate about things economic, and told her durable goods (that is, the periodic Census report on same) would be huge. Sure enough!

(Continued)

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