The accelerating increase in new Covid-19 cases is slowing the pace of the U.S. economy’s recovery from the pandemic. According to Bloomberg economist, Eliza Winger, “Most high-frequency indicators have shown signs of moderation. Consumers’ income and spending benefited from fiscal support and reopening efforts, both under renewed strains. The uncertainty was likely behind the latest deterioration in consumer sentiment, a key to the economic outlook.”
So, where do we stand?
- Recent data shows that credit card spending has stalled.
- OpenTable is showing a slowdown in restaurant reservations.
- Initial jobless claims declined by the most in a month to 1.31 million in the week ended July 4, but they’re still double the highest level registered during the last recession. Furthermore, as states walk back their openings, these numbers are expected to increase.
- A surge of layoffs are coming as company announce large layoffs to deal with COVID, e.g. American Airlines – 25,000; United Airlines – 36,000; Walgreens – 4,000; Macy’s – 3,900; AT&T – 3,500; Hilton Hotels – 2,200; Chevron – 5,000; Boeing – 7,000; Uber – 3,700; Virgin Atlantic – 3,100; Wells Fargo – haven’t said but I am sure will exceed 20,000. This short list accounts for over 110,000, so the numbers will be large.
- While many mortgage holders are refinancing to take advantage of the low rates, one in 10 households with a mortgage failed to make their last payment, and 16% of respondents in a U.S. Census survey said they fear they can’t cover the next one.
- Federal Reserve Bank of Dallas President Robert Kaplan said that rising hospitalizations and death rates are having a “chilling effect on economic growth.”
- With the eviction moratorium ending, the eviction of 20MM renters this month is possible. However, this has several ramifications, where will these people live and who will replace them as so many people would rent can’t make payments. Thus landlords will experience pain.
- The $600 additional unemployment payments are ending.
- The PPP program is about to end and those that took PPP funds have mostly spent them.
- M&A volume is falling.
Thus, my take is that this is far from over. While I would argue that we are not in a second wave of the virus as we never exited the first, we are in an inverse square root recovery, but we could quickly move into a “W” recovery.
The key will be what will Congress do. The parties are wide apart at the moment, and to add to the problems, the Administration is pushing for a payroll tax cut (dubious effect), refusal to fund state COVID testing and tracking, and blocking billions of dollars that would go toward bolstering the Centers for Disease Control and Prevention, the Pentagon and the State Department to combat the pandemic. Somehow they haven’t yet accepted that this is a public health crisis and until that is solved, the economic crisis cannot be dealt with.
So, keep cash on hand and watch receivables and all leading indicators. It is going to be a rough second half, folks!
Recent Posts
Boosting Common Sense Decision-Making in Your Organization
Discover how to enhance decision-making in your organization by focusing on three crucial areas: solving the right problem, gathering all the available information, and understanding the intent. Learn to empower your team, foster a purpose-driven culture, and improve organizational clarity for better decision-making.
Do You Understand Your Costs to Ensure Profitability?
You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.
Sunk Costs Are Just That, Sunk!
If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.
Do You REALLY Know Your Business Model?
Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.
Ideation! Harder Than It Sounds
Bringing in new ideas, thoughts, understanding, and logic is key as your organization faces the challenges of a changing environment. But when you do an ideation session in your organization… how does it go? For so many organizations, many times, after a few ideas have been thrown out and rejected, the thought process slows down very quickly, and a form of hopelessness takes over. How does your organization have better ideation? I’ve come across a new approach with a few teams lately.
Recruit, Recruit, Recruit!
An uptick in business has begun this quarter, and companies are rushing to hire to meet this surge in demand. What amazes me is how many are so unprepared to hire. Continual recruiting is key to the survival of a company. It isn’t the same thing as hiring—continuous recruiting is building a pipeline of people that you would hire if you needed to fill a position, or “A players” you would hire if they were available.
We All Need Clarity
If your organization is focused on obscurity over clarity, whether intentionally or not, your “A” player employees are vulnerable. There is a looming talent crunch. As we start to emerge from COVID, demand is increasing, and many are scrambling to fill positions to meet that demand. Headhunters and recruiters are soon going to be calling your key “A” employees. Have you been giving them a reason to stay?
Not Another **** Meeting
As Leonard Bernstein put it so well, “To achieve great things, two things are needed: a plan and not quite enough time.” Your meetings can be shorter, more fruitful, and engaging, with better outcomes for the organization, employees, and managers. It’s time to examine your meeting rhythms and how you set meeting agendas. This week, I break down daily, weekly, monthly, quarterly, annual, and individual meeting rhythms, with sample agendas for each.
Is Your Company Scalable?
Let’s start here: Why should your company be scalable at all? If your business is scalable, you have business freedom–freedom with time, money, and options. Many business leaders get stuck in the “owner’s trap”, where you need to do everything yourself. Sound familiar? If you want a scalable business that gives you freedom, you need to be intentional about what you sell, and how.
Are you ready for the Talent Crunch?
Companies are gearing up to hire. Unfortunately, many are competing within the same talent pool. Some experts are currently predicting a strong economic recovery starting in May or June. But as the economy booms, there is going to be fierce competition for talent. How will you fare in the looming talent crisis? Your organization should be creating a plan, now, so you can attract the talent you need in the year ahead.