Only 10 years ago, this country went through a deep recession in which people lost their homes, jobs were very hard to find and many businesses shut down, due to lack of sales. There are signs that have been present since the previous recession that many sectors of the economy and many people never really recovered.
Now that the mainstream media is beginning to tell the truth about the state of the economy in the United States, online business owners wonder what to believe and wonder if they should be concerned about another recession. In order to examine this issue, we spoke to Tuck Associates. Tuck Associates have solutions for consumers and businesses who are in the throws of heavy debt loads.
Troubling Signs Have Never Really Ended
In many areas, entire malls have been abandoned, and the homeless population in some states is so large that there is a crisis situation. Some cities, such as Detroit, have lost over half of their population as abandoned buildings sit untended and falling apart. Housing affordability has decreased in many cities.
The Atlantic Magazine wrote about the plight of the people who have lost their homes to foreclosure, many of whom have still not recovered because they are forced to move from place to place by the rules affecting those with transient lifestyles, such as people who are living in one’s car or in motels and hotels. They cannot amass enough money to place themselves in a stable rental or home since they must move every two weeks or every 28 days. The Atlantic also states that most of the jobs created during the post-recession times tend to have less security and lower wages.
According to the Wharton School of Business, a fifth of all employees lost their jobs during the Great Recession. For many of those who were left jobless during that time, they never have recovered to receive truly sustaining employment ever again. The Wharton School also states that millennials who graduated during the recession were especially impacted financially. Their entire generation has a lower homeownership percentage than other generations and many of these cohorts are unable to leave their parents’ homes and begin families under crippling student loan debt.
Overall, the Economic Policy Institute states that our government has done nothing to address the true main issue in the economy of the United States today – the growing inequality between the rich and the poor and the shrinking middle class. EPI states that the government needs to realize that public spending will indeed help the entire economy, as more people get lifted back into financial wholeness and out of poverty.
New Signs of Trouble
According to Fortune Magazine, the New York Federal Reserve Bank predicts an almost 33 percent chance of a new recession in the next year. Also, the yield curve for Treasury Bonds is inverted. That means investors have more faith in the returns of a three-month bond than a 5- or 10-year bond. Thus, investors are also wary of the economy.
Another huge sign of trouble was reported in February of 2019. CNBC cited statistics gathered by the New York Federal Reserve Bank that 7 million people in the U.S. were 90 days or more in arrears in their auto loan payments. In most areas of the country, a car is a necessity. When people cannot make such a crucial payment, it demonstrates that many people are tapped out and are sinking into serious financial difficulties. This statistic makes it seem hollow the assertions by some commentators that consumer spending will help either avert another recession altogether or make it less harsh than the preceding one.
The Wharton School also cited the new issue related to the trade war with China that businesses who may have tried to expand before the trade war began are much less reticent to make a move that could lead to the risk of financial exposure today.
How Business Can Be Harmed in a Recession
Capital May Not Be Available
Entrepreneur Magazine stated that, during the Great Recession, capital for small businesses basically did not exist. This made both growth as well as any help in staving off the effects of the recession very difficult for small businesses during that time.
Sales May Be Much Harder to Achieve
Entrepreneur also stated that businesses whose owners had not made them recession-proof saw their sales dry up. Existing customers were lost and new customers were hard to almost impossible to find. Many businesses shuttered during that time. It did not matter if you were a business-to-consumer or business-to-business enterprise – either way, you suffered. The problem was that most businesses were suffering from a lack of consumers. The consumers, in turn, did not have enough work to supply the basics for themselves, so they reined in their spending and consumption in a dramatic manner.
Steps Your Business Can Take to Be Recession-Proof
According to The Balance Small Business, any kind of enterprise that can thrive during a recession or economic downturn is called a “counter-cyclical” business.
Inc. Magazine interviewed small business owners and asked their plans for surviving a recession. Some of the ideas for making their business immune to the recession included:
Increasing sales: Business owners told Inc. that they were working to expand their customer base and/or sales to existing customers. They also were actively working on new products and services, and they have worked with complementary businesses to help share their customer bases with each other.
Reducing costs: Other business owners are slashing costs to help have more cash on hand. Many are holding off on any expansion goals for now.
Expand B2B sales to recession-proof businesses: Some types of businesses even thrive in recessions. According to Franchise Business Review, recession-proof businesses include thrift and consignment shops, food and beverage businesses, repair services, temporary employment agencies, IT, cleaning organizations and health and senior services. If your business can provide goods or services to these sectors, you will better weather whatever the recession will throw at your business.
Tuck Associates wants all business owners to be aware of the looming recession and consider their customer base and how that base will likely be impacted by a downturn, such as in the Great Recession. Then, business owners can plan to protect their businesses in a manner suitable for their environment and situation. Tuck encourages business owners to call with any questions they have about debt and credit. They are there to help.