Fleet Management

Roadsigns to Recovery

January 19, 2010

SHARING TOOLS        | Print Subscribe
It looks like the recession is over. Now the question on everyone's mind is the recovery. Even though the economy is heading in the right direction, expect a bumpy ride, said an economist speaking at Heavy Duty Aftermarket Week Tuesday.

"The recovery is one of the most difficult phases of the business cycle," said Bob Dieli, President and founder of RDLB Inc., an economic research and management consulting firm
based in Lombard, Ill., speaking during the opening session HDAW in Las Vegas.

The recovery phase, he explained, has three main characteristics:

* Uneven: Just as recessions don't start in all sectors and regions at the same time, so do recoveries. "The idea that because there is a recovery going on that you are going to be in it, or because you're not in it doesn't mean it's not happening, is not true."

* Unsettled: Not all the news about the recovery will be good news. We will continue to get bad news about some sectors and regions.

* Unique: Every recovery is different from every other recovery. In this one, the big differences affecting it are the way housing and the financial sector were involved. It's rare that you actually see an industry bottom out, Dieli explained, but that's exactly what happened with the housing market in this recession.

Dieli suggested three key areas to watch: housing, employment, and commercial lending.

Housing goes down in every recession, but in this one, after reaching an unsustainably high level in 2006, it collapsed - to the point where we actually reached only the replacement level of demand. "Every year, about 500,000 houses blow down, burn down or get torn down and have to be replaced." That's where we currently are in single family housing starts. Getting back to a 750,000 annualized level would suggest a recovery is taking place. But because construction is affected so much by the seasons, we won't actually see much evidence of recovery in the housing market until at least the spring.

We've experienced the worst job losses ever seen in a recession, both in absolute and percentage terms. Dieli emphasized that the recovery in employment will come in fits and starts, he said. Although some down months may lead people to talk about a "jobless recovery," he said, that kind of progress is normal. "On a month-to-month basis, this thing is going to jiggle around," he said, pointing to the squiggly graph line showing employment numbers.

Commercial lending: One of the few charts shown that did not show much sign of hitting bottom and turning the other way was one showing the year over year change in commercial and industrial loans at commercial banks. "The bankers are all hiding under their desks," Dieli said, "and this is the third time in as many recessions that they've done this. And one of the reasons the recovery has been so slow is the bankers didn't help." In the previous two recessions, he said, it took three years for this area to recover. "It seems unlikely the Federal Reserve will allow that to happen again," he said.

In addition to monitoring these areas to track the recovery, Dieli also emphasized that business leaders need to look back at their own businesses and see what happened in past recessions and recoveries, in order to make plans to deal with it.

Meanwhile, Dieli said, legendary college football coach Paul "Bear" Bryant's advice still holds: "Keep your chin strap buckled at all times."


Comment On This Story

Name:  
Email:  
Comment: (Maximum 2000 characters)  
Leave this field empty:
* Please note that every comment is moderated.

Newsletter

We offer e-newsletters that deliver targeted news and information for the entire fleet industry.

GotQuestions?

ELDs and Telematics

sponsored by
sponsor logo

Scott Sutarik from Geotab will answer your questions and challenges

View All

Sleeper Cab Power

Steve Carlson from Xantrex will answer your questions and challenges

View All