TEMPERATURE DROPS – SOME BUSINESS RISES

I heard a TV commentator describe the graphic shape of our economic situation as a V-W shaped recovery.” The theory is that some segments of the economy bounce right back while others experience something different.

The V’s

The V part of the VW economy includes dynamic growth companies and large exporters. Apple is enjoying a V recovery. Salesforce.com just reported a big, booming V quarter on Friday. Mobile broadband is an entire industry that will enjoy sustained V growth. Low-tax states like Texas, Tennessee and North Dakota are experiencing V recoveries.

The w’s

America’s W economy includes all those companies, industries, states, cities and personal careers where deteriorating value propositions were masked in good times. It always happens that way. Recessions unmask bad business models. Today’s W economy: newspapers, McMansion builders, inefficient manufacturers, high-tax state and local governments, and workers unable to adapt, relearn and relocate.

Warren Buffett described it as a “tide economy” where the tide goes out and everyone sees who’s “swimming naked.” That’s a funny one – but it does describe a lot of what has gone on this year. You know, the surest sign that we have too much economic time on our hands is when I read three different graphic descriptions of the economy in one edition of the Wall Street Journal.

Well, business owners have known that a long recovering was in the offing for some time. They started planning and taking action back in 2008. What I see in our area of the country is business has been reducing costs – labor, capital investment and inventory. In contracting – inventory is not a cost we take on in a dramatic way. Hopefully your capital equipment was in a healthy state at the start of the recession. Labor. That is our big cost. Contractors look labor cost in the eye every day.

The so called “job recovering” (which is what economic development is really all about - anyway) will be slow. Depending on where an industry falls on the “V-W” graphic, jobs in certain industries will “come back” at varying speeds. "Jobs coming back" is more of an on-off thing for many industries. In contracting, we adjust all the time. When’s the last time you heard a story about manufacturing sharing labor. Never. It’s not in the DNA of their business. It IS in ours.

I know one thing for certain. Our industry ALWAYS adjusts for labor and we’ve done it in some extraordinary ways this year. Adjusting labor in 2009 has been a matter of degree not novelty. IEC members who work together have been able to hedge unilateral adjustments in labor by working with each other. Adjusting for labor needs is one of our strengths – though none of us like it. Electrical contractor jobs will “come back” one job, one week at a time and the come back will often mean going from 25 hours to 40 hours per week. Consider how other IEC owners can help you bridge the labor gaps from slow to busy. We’re experienced at this and it is our strength whether we are a “V” or a “W.”