In 2000 I wrote an article in Vending and OCS News about keeping some powder (cash) dry. In the article I argued that we were likely to see a recession in 1998 and a significant downturn in 2012 that was going to last for about ten years.
When I re-read this article I didn’t think I was clairvoyant (although some friends of mine did).
I did think about demographics. This is the first of the two reasons the economy is not likely to turn around quickly. Demographics are moving away from consumer spending. Baby Boomers are moving from peak spending to peak savings and spending down their assets.
Baby Boomers don’t need to buy houses. They don’t need to make major purchases. They’ve already done those things. They are now thinking about how are they going to live for another thirty to forty years and not run out of money.
We won’t see another spike in people entering their peak spending years for about ten years. This is when the millennial generation will enter their peak spending years. At this point the consumer might just take over again.
We keep getting better at what we do. In 1968 I was learning how to drive. I used to go to Finch Pruyn in Glens Falls with my father to fill our vending machines. We had to fill the machines twice a day, seven days a week. That’s because Finch Pruyn employed over 1,500 people seven days a week, twenty-four hours a day making paper.
Today this company employs about 250 people in the factory making three times the amount of paper they made in 1968.
Productivity advances haven’t just come to manufacturers. I see it in the financial service business, medical business and any business I can think of.
Our employment problem isn’t just in manufacturing. All industries today are getting more efficient. We just don’t need as many people to produce a given unit of service or products. Until the economy grows out of this problem and it’s likely to take a long time, we’re going to have employment problems.
Employment problems lead to spending problems, which hurts the economy. We have a two front issue that is not likely to be solved by any short-term or for that matter long-term fixes from the government.
What do you think this means for you, your business and your wealth strategies? I would love to hear your comments. Please contact me at Jpatirck@stage2planning.com or click here to set a time for us to talk.
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