Last week when it was announced that only 54,000 jobs had been added in May, based on the press coverage, you would have thought that the news indicated that the economy was headed off a cliff! In our June 6th article we talked about the fact that we all need to re-adjust our perspective on this recovery. This was abundantly clear last week as the pundits and pollsters were rabid about how bad the jobs news was.
Here is the perspective we need: This was the worst recession in modern history, certainly the worst since the Great Depression in the 1930s. This recession lasted 70 percent LONGER than the historical average. Because of this, you can safely assume that this recovery will take at least 70 percent longer or more for full recovery. And, as with all historic recoveries, none of the data will show a continuous straight line of improvement.
Recoveries occur in a “hiccup” fashion. We will have two to three months of good data followed by a month or two of bad data. This is how it always works. So we allowed ourselves too much enthusiasm when the jobs data for February through April of this year was very positive. This caused national angst when the May numbers were announced where only 54,000 jobs were added. Again, let’s keep this in perspective.
Here are the U.S. historic job losses during the depths of the last recession (officially the recession began in December 2007 and ended in June 2009):
As you can see, more than eight million jobs were lost during the 18-month recession. The worst months were December 2008 through February 2009 where on average the U.S. lost nearly 700,000 jobs per month. How many economists would have been thrilled to see a month with an increase of 50,000 new jobs back in late 2008 and early 2009? Nearly all I would imagine.
When you hear the pundits lament about how bad things are based on one month’s worth of data, consider that bad news sells in the media. We love watching it, we love hearing it, and we love complaining about it. But the economy is all about perspective and outlook. If enough consumers (and we are all consumers) believe that we are going to “double-dip,” we probably will because we will change our spending patterns.
That is why the smart money right now in the business world is quietly ignoring the experts and taking advantage of the news to acquire market share, new customers, and potential growth via acquisitions. To many of you it will come as a shock that M&A activity was up quite a bit in 2010. And this trend has continued in 2011. Why? Because the smart fellows running corporations and equity firms know that it is the time to buy when everyone says that doom is upon us.
They are quietly snapping up deals in order to have developed platforms ready to take full advantage of this current economic recovery. So where do you stand? Is the glass half full or half empty? If you are a middle-market business owner, you need to make sure that you are ready when the buyers come your way during this recovery. There is simply too much capital available for acquisitions for you to sit on the sidelines any longer. Don’t let this next M&A wave pass you by.
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