Dean Barber

My Look Ahead

In Uncategorized on January 6, 2013 at 6:49 am

If I was smart, I would be a futurist. Those are people who lay claim, usually in book form, to knowing what is going to happen years from now, with a sprinkling of the outlandish to make us sit up and take notice.

And here is the key, a futurist has parlayed his or her visions into money, which is far more clever than whatever they might say, most of which will never be realized or even remembered within their lifetimes.

Now I have not yet broken the code to call myself a futurist, although a book, regardless of its content, might well seal the deal. No, the truth is that I am but a mere business consultant, albeit one with some ideas on where we might be going.

In my last blog – My Look Back — I related where we have been. Not surprisingly 2012 was by no means a stellar year in terms of economic growth but there was at least some growth, although mass unemployment remains endemic in our country. The massacre of the innocents in Newtown, Conn., still haunts me.

Now at the start of the New Year, we face certain uncertainties. So this blog will be “My Look Ahead” in suggesting the challenges and opportunities that may come our way.

The Boob Factor

I think I should start with our dysfunctional federal government. All too often government action (and lack of action) simply adds to uncertainty. We hear this from the business community time and time again, and it’s true. In order to plan for the future and make needed changes and investments, business people want to see and walk over the playing field and understand the rules.

It is unlikely that we are doing worse with the new 113th Congress that was sworn into office this past week. It follows the departing 112th Congress, which because of its stupendous lack of productivity, had a favorability rating that polled lower than the idea of a Communist takeover of America. To call these people (members of Congress and not communists) “boobs” would be an insult to boobs everywhere.

As you all know, the outgoing Congress voted in favor of legislation this past week that raised tax rates for the wealthiest Americans while making Bush-era tax cuts for the middle class permanent. But the balanced approach to reduce the national debt, as promised by President Obama, was not evident. There were effectively no spending cuts, although the president hints that they are coming. 

Now we learn that more cliffs await us — the debt ceiling crisis and the will-the-government-shut-down crisis, promised by some Republicans who felt they got rolled. Obama has vowed that he will not negotiate on the debt ceiling, hoping to avoid the 2011 conflict that led to a credit rating downgrade and pushed the country close to default.

It is worth noting that the fiscal cliff crisis and the automatic $600 billion spending cuts and tax increases in 2013 that were to result was an invention of Congress precisely because of the 2011 debt ceiling showdown.

“To praise this new deal as an accomplishment is to praise an arsonist for extinguishing his own fire,” wrote Peter Coy, economics editor with Bloomberg Businessweek. A glum David Brooks, columnist with the New York Times, questioned whether any wisdom can be forthcoming from Washington to put the nation’s finances in order.

“I’d say we’ve accelerated our trip to disaster. My big puzzle is why young people are not in the streets. They are really being hosed, sentenced to a living standard much lower than their parents because of boomer greed.” 

Now those are rather stark assessments from two serious journalist who would not make for good futurists because they exhibit too much common sense. 

By delaying painful decisions on spending cuts, we can only see more confrontation and uncertainty, which means that many businesses are likely to remain wary of expanding or hiring. As a result, many economists believe, and your all-knowing, sage-like consultant (that would be me) predicts that the U.S. economy will grow a meager 2 percent or less this year, down from 2.2 percent in 2012. The unemployment rate will remain a high, probably not dropping below 7 percent.

The sad part is the economy might be growing at a 3 percent annual rate were it not for the haziness surrounding the budget standoff  in Washingon, which proves that there are times for clowns and there are not times for clowns.

And yet there have been positive signs. Corporations have cut costs and have amassed a near-record $1.7 trillion in cash. Home sales and prices have been rising consistently, along with construction. Hiring gains have been modest but steady. Auto sales in 2012 were the best in five years. Compared to the rest of the world, we just might be the least dirty shirt in a bag of dirty laundry.

Hello China

At least that is how China might see us. In spite of our politicians frequently engaging in China-bashing, Chinese investment in the US will likely break another record in 2013, according to research firm Rhodium Group. That’s after a record year in 2012 with deals worth more than $6.5 billion, a 12 percent increase from the previous record of $5.8 billion in 2010. The number reflects direct investment in the U.S. marketplace and does not include the estimated $2 Trillion in U.S. Treasuries held by the Chinese government. 

From the first three quarters of 2007 to the first three quarters of 2012, Middle East investment in the US is down 86 percent, Canada down 75 percent, and Europe down 49 percent, according to the Bureau of Economic Analysis.

But China was up 321 percent in the same time period. The truth is that Chinese companies, many of which are partly owned and/or controlled by the government, see something they like about the US economy that others don’t. 

Chinese majority-owned businesses in the US now employ 29,000 people, up from fewer than 10,000 five years ago.

As a site selection consultant, I would very much welcome the idea of assisting a Chinese company to find the right and best location for a future manufacturing plant in the US. And I suspect virtually all of the communities that would be considered would also welcome such capital investment with open arms. Actually, that would be a prerequisite for a community to be in the running. 

So if there are any Chinese business people out there reading this blog, please know that I can help your company find the best and most productive location for your future operations in the US. I am your man. 

Modest Growth for Manufacturing

US manufacturing appears to be recovering slowly from a slump last fall. Manufacturers added 25,000 jobs in December, the most in nine months. Factories had cut jobs in three of the four months through November, according to government data.

Another encouraging sign: Americans are expected to buy more cars in 2013, which will boost manufacturing output. Auto sales will likely rise nearly 7 percent in 2013 over last year to 15.3 million, according to the Polk research firm. Sales likely reached 14.5 million last year, the best since 2007. In 2009, sales were just 10.4 million, the fewest in more than 30 years.

Again, so much rides upon on an undependable Congress. If the politicians can raise the federal borrowing limit without a fight that damages confidence, companies might boost spending on computers, industrial machinery and other equipment in the second half of 2013, economists say, which would be a shot in the arm for our manufacturing sector.

I will be writing more about US manufacturing as I have a passion for it, but most economists believe we will grow our manufacturing sector by 150,00 to 200,000 jobs in the coming year. That’s not bad, but a far cry from the 6 million manufacturing jobs lost during the first decade of the 21st century.

Housing Keeps Improving

Economists are nearly unanimous that the housing market will keep improving in 2013, which can only boost consumer confidence

Sales of new homes in November reached their highest annual pace in 2½ years. They were 15 percent higher than a year earlier. And October marked a fifth straight month of year-over-year price increases in the 20 major cities covered by the Standard & Poor’s/Case-Shiller national home price index.

Five years after a housing bust left a glut of homes in many areas, suddenly we don’t have enough houses. Only 149,000 new homes were for sale at the end of November, only slightly above the 143,000 in August, the lowest total on records dating to 1963. And the supply of previously occupied homes for sale is at an 11-year low.

Low mortgage rates have helped spur demand. The average rate on the U.S. 30-year fixed mortgage is 3.35 percent, barely above the 3.31 percent reached in November, the lowest on records dating to 1971. A housing recovery boosts construction jobs and encourages more spending on furniture and appliances, which in turn boost manufacturing.

But sadly, I keep circling back to Washington for cues as policymakers can do much to encourage or discourage consumer confidence. The fiscal cliff delivered a tax hike for 80 percent of working Americans with the end of a two-year Social Security tax cut. The tax is rising back up to 6.2 percent from 4.2 percent. The increase will cost someone making $50,000 about $1,000 a year and a household with two high-paid workers up to $4,500.

It’s clear that I have only scratched the surface on what might develop in 2013 and I do apologize for that. I have no future as a futurist. But I do write about the here and now and where we appear to be going. I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                 

 

 

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