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It’s a Double-Dip Recession

It is time to speak the truth. In the words of Hans Christian Andersen, “the emperor has no clothes.” We are in the midst of a semiconductor “double-dip” recession, whether we want to admit it or not.

How many of your colleagues are whispering at the coffee station about how “slow” business is, how few emails they received, or how little backlog they have going into the fourth quarter? It is time to look the beast in the eye and admit where we stand. Only then can we take action to adapt to the situation at hand.

The Labor Department reported Friday that employers added 103,000 jobs in September — on the surface, a positive indicator after very meager job gains in August. However, 45,000 of these “gains” were in fact a statistical adjustment reflecting striking Verizon workers returning to their jobs. This leaves us with essentially “no change” in job creation. Economists estimate that the nation needs to add 150,000 jobs each month just to keep up with population growth. You do the math; we are falling behind.

Fewer jobs means lower consumer spending, and two thirds of the US economy is driven by consumer spending. It is a vicious circle — bad economic news, layoffs, falling consumer confidence, and less consumer spending, resulting in more bad economic news and more layoffs.

I'm an optimist, but I'm not a fool. The electronics industry is dependent on consumer spending. In July, Intel was estimating quarterly revenue in the range of $13.5 billion to $14.5 billion. With Intel's third-quarter results now out, with revenue at $12.8 billion, where are the bullish analysts of just 90 days ago? Intel's forecast for the next quarter is flat at best — revenue of $12.8 billion to $13.3 billion. Whether listening to iSuppli, Gartner, or SIA, the message is the same. Inventories are up, and demand is down. It does not take a PhD to calculate what is coming.

In the 1992 presidential campaign, the Bill Clinton camp focused the public away from international issues by chiming, “It's the economy, stupid”. Unemployment had jumped from 5.3 percent in 1989 to 7.5 percent in 1992. People were angry and responded to his message.

In 2007, unemployment stood at 4.6 percent. Today, it is over 9 percent. Wake up, people. It is 1992 again.

15 comments on “It’s a Double-Dip Recession

  1. FLYINGSCOT
    October 11, 2011

    Not only does the emperor have no clothes, the clothes have already been pawned and the money all spent paying off exorbitant interest charges on the overdrawn credit card.  

  2. Ariella
    October 11, 2011

    This week I saw an article  that said some people are now earning less in what is called the “recovery” than they were during what was called the “recession.” My observation on that is:  If that is the case, it seems it doesn't make sense to call it a recovery. And today I saw an article called “What Should We Call the Non-Recession Non-Recovery?”

  3. Wale Bakare
    October 11, 2011

    Infact, its utterly worrisome. I think world needs economic structural re-adjustment model so as to alleviate the growing phobia on global financial situation.

  4. _hm
    October 11, 2011

    It is early to say double dip recession. Many results in market are encouraging. It may not be new recession.

  5. Kunmi
    October 11, 2011

    @Michael: You have accurately defined the current situation with a notable comment that our nation depends on Consumers spending. With all these challenges, can this nation ever turn to be a producing nation rather down consuming? Because depending on consumer spending appears to be  a major challenge to recovery. If you do not have a job as it was analzyed in your article, your spending ability goes down the drain. It is better we wake up to reality.

  6. Daniel
    October 12, 2011

    Yes, the growth of any industry depends up on either the spending power of people or the exporting power. Since most of the finished products are selling within the country itself, the spending power can affect the production drastically. This may intern end up in winding up of the company and hence increased the unemployment rate.

  7. mfbertozzi
    October 12, 2011

    Just to complete the picture, I would like to report another (recent) attitude: savings on labour costs. I have experienced several heads of procurement are proud for cut costs on daily tariff from their suppliers, especially in the area of services. “We have changed the mix, we asked supplier to provide junior people instead of senior”. I have heard similar sentece, several times. What's the result? What's service's quality achieved? Considering the end-to-end process, low quality costs much more  a senior which ensure a professional work.

  8. Ariella
    October 12, 2011

    Yes, ccompromising on quality to save cost does not usually pay in the long run. I've noticed a lot of complaints in the retail world from customers who say the quality has gone down from brands they have come to associate with higher standards.

  9. mfbertozzi
    October 12, 2011

    I agree Ariella, other point is about Call Center – Help Desk. First contact for customers is really important and based on satisfaction perceived, it could make them very happy, satisfied and could potentially increase their spending. Savings for putting there junior people only for answering without any support provided, is a good way for losing customers.

  10. Ariella
    October 12, 2011

    Absolutely, mfbertozzi. When customers are already frustrated because something isn't working the way it should, limiting their access to people who are not qualified to help them only increases their frustration, and then any loyalty they may have had to the business would likely fade away.

  11. Mr. Roques
    October 12, 2011

    So, what does theory tell us? How to get out of the vicious cycle? I guess the government needs to increase the amount of money in the streets (lower interests?)… any economists out there?

  12. JADEN
    October 13, 2011

    A friend jokingly defined Recession as “if your neighbor get laid off, it's a recession.  If you get laid off, it's a depression'.  The definition is accurate because it indicates economic results: a loss of jobs, a decline in real income, a slow down in industrial production and manufacturing, and a slump in consumer spending.

  13. elctrnx_lyf
    October 13, 2011

    jaden, that's nice one. if this is like wheel then the economy should never come out of recession. This isn't the case as long as you have new population that have needs and other infrastructure requirments. But in my opinion economy will keep swinging from dip to high to dip …

  14. arenasolutions
    October 13, 2011

    I feel like in San Francisco, we have been affected less by the recession than other places, so I feel very lucky. What's interesting though, is that if we are in fact heading toward another recession, not everyone seems to be concerned.

    For example, at my office, we did a poll of over 1000 small-mid-sized mfg (who I would expect to be more concerned than other industries, due to the automation/outsourcing along with the recession) but spirits were high. It made me wonder if there are some who aren't seeing the recession, all around the country –

     

    http://blog.arenasolutions.com/2011-arena-solutions-manufacturing-outsourcing-survey/

     

  15. Anne
    October 13, 2011

    The threat of a recession makes everyone pull up their sleeves and do something.  Whether you are in big business, entrepreneur or an employee this problem affect everone. But unemployment is one of the worst effect recession.

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