Download Labor Market Trends How We Compare

What's Ahead? IMF Predicts Slow but Steady U.S. Comeback
Consumer confidence in the United States sank to its lowest level in nine months -- just in
time to adversely affect retail sales for the 2013 holiday season. The overall index on consumer
sentiment fell to 75.2 in early October from 77.5 in September, according to a survey conducted
by Thomson Reuters and the University of Michigan.
One key reason for the decline: The government's 16-day shutdown. However, there may be
more to the story than just the political impasse, because this is the third straight month that the
survey has reported deterioration in consumer sentiment.
Labor Market Trends
IMF reports that the U.S. unemployment rate peaked at
about 10 percent in 2009. In August 2013, domestic
unemployment was down to just 7.3 percent. Prior to the
Great Recession, domestic unemployment was just 4.6
percent in 2006 and 2007, however.
How We Compare
Table 1 below shows that U.S. unemployment is
currently -- and projected to be -- close to the average
unemployment rate for all advanced economies.
Countries with lower unemployment than the United
States include Singapore, Hong Kong, Korea,
Switzerland and Norway. Advanced countries with the
highest projected unemployment rates include Spain,
Greece, Cyprus and Portugal.
The IMF projects U.S. employment growth to outpace
the global average, however. U.S. employment is
expected to grow 1.1 percent in 2013 and 1.4 percent in
2014. Employment growth rates for all advanced
economies (combined) are below 1 percent in 2013 and
Glimmers of Hope
On a more positive note, the
latest consumer sentiment
survey revealed that
Americans are fairly optimistic
about income and inflation,
resulting in a modest uptick in
car and home sales.
2014.
Southern European employment rates are expected to
continue falling in 2013 and 2014, according to the IMF.
Table 1: Projected 2013 Unemployment Rates in
Select Advanced Economies
The International Monetary
Fund (IMF) also released its
October 2013 World Economic
Outlook, which reported that
the United States is slowly
recovering from the Great
Recession. Reasons for our
slow but steady rebound
include strong consumer
demand, an improving housing
market and higher household
net worth in 2013.
Country
"The U.S. economy remains at
the center of events,"
according to IMF. Growth in
U.S. real gross domestic
product (GDP) per capita was
2.0 percent in 2012, outpacing
the GDP growth rates for many
other advanced economies,
including Germany, France,
Italy, Spain, Japan, Canada
and the UK.
Our growth is expected to
continue to outpace other
advanced economies, except
Japan, in 2013 and 2014. The
IMF expects Japanese growth
to stall in 2014 as the
government tightens its fiscal
policy, however.
2013
Singapore
2.1%
Hong Kong
3.2%
Korea
3.2%
Switzerland
3.2%
Norway
3.3%
Australia
5.6%
Canada
7.1%
United States
7.6%
All Advanced Economies
8.1%
Italy
12.5%
Portugal
17.4%
Spain
26.9%
Greece
27.0%
Source: IMF 2013 World Economic Outlook, Table B1,
Advanced Economies: Unemployment, Employment
and Real GDP per Capita
Threats to Domestic Growth
IMF predicts U.S. growth will average 1.25 percent in 2013 and 2.5 percent in 2014. But these
forecasts were predicated on a timely resolution of the government shutdown (which was ongoing
when IMF released its outlook), minimal changes to public discretionary spending, and a longterm increase in the debt ceiling.
The October debt deal actually didn't resolve anything. It's a temporary patch that reopens the
government until January 15 and lifts the debt ceiling until February 15. The deal also set a
December 13 deadline for a Congressional budget resolution committee to work out a final
budget outline.
The IMF warns that if Congress cuts back significantly on the federal budget or the government
defaults on its debts early next year, it could "seriously damage the global economy." Ongoing
political polarization, tighter financing conditions and possible tax increases also threaten to lower
domestic growth forecasts.
The "Beige Book"
The Federal Reserve echoed these concerns in its Beige Book report* released the same day as
Congress struck its debt deal. The fear of reliving the government shutdown and debt crisis in
early 2014 could dampen future consumer spending, especially during the holiday shopping
season.
Here are some Beige Book highlights from the most recent reporting period:

Consumer spending continued to increase overall.

Activity in the travel and tourism sector expanded in most areas with Atlanta, Boston and
New York areas being particularly upbeat.

Demand for non-financial services rose overall. For example, demand for staffing
services increased in the New York, Philadelphia, Cleveland, and Minneapolis areas. In
contrast, staffing service activity was down slightly in the Chicago and Dallas regions.
Demand for technology services increased in Kansas City and San Francisco.

Manufacturing activity expanded modestly. For example, Cleveland, St. Louis, and
Minneapolis experienced faster growth, while New York, Richmond, and Chicago saw
growth weaken. The automotive and aerospace industries continued to be a source of
strength in a number of regions. Demand for fabricated metals was mixed. Cleveland,
Chicago, St. Louis, and San Francisco reported steady increases in the demand for steel.
However, Cleveland, Chicago, and Atlanta indicated that much of the higher demand was
being met by imports.

Residential construction continued to increase at a moderate pace.

There were mixed reports on agriculture, with excess precipitation and drought having an
impact on the sector.

Energy and mining activity expanded or maintained high levels, with the exception of the
coal industry in the eastern half of the nation.

Auto sales continued to be strong, particularly in the New York area where they were said
to be increasingly robust. In contrast, Chicago, Kansas City, and Dallas indicated slower
growth in auto sales in September.

Growth in retail sales was steady in most areas, but picked up some in Cleveland and
Richmond and slowed in Chicago, Kansas City, and Dallas.

Retailers generally remained optimistic about the holiday shopping season, with contacts
in Philadelphia and Chicago expecting this year's holiday sales to be about equal to last
year's despite the traditional holiday period being six days shorter this year. In addition,
Dallas noted strength in retail imports in advance of the holiday season, with growth
stronger than a year ago.
Global Outlook
Across the globe, IMF found that many other advanced economies -- such as Canada and Japan
-- are modestly growing. Several Eurozone nations are also showing signs of recovery, but some
southern European nations -- such as Spain, Greece and Portugal -- are "still struggling."
Growth in emerging markets -- such as Mexico, India and China -- remains higher than growth in
advanced markets. But emerging market growth rates have fallen below their elevated levels in
recent years, due to cyclical factors and decreases in potential output growth. Many emerging
nations experienced a bigger drop in GDP growth than IMF had previously predicted.
In 2010, the average growth in real GDP for emerging countries was 7.5 percent. It's fallen to just
4.9 percent in 2012 -- and is expected to be just 4.5 percent in 2013 and 5.1 percent in 2014.
Are You Ready for a Growth Spurt?
Political and demographic changes are reshaping the global economy. Worldwide supply and
demand in the future will be affected by growth in:




Life expectancies;
The emerging-market middle class;
Wealth disparities; and
Water, food and energy consumption.
U.S. businesses that stay on top of these trends and recognize emergent opportunities and
threats will be positioned to prosper as the domestic economy slowly builds steam.

The Beige Book is officially known as the "Summary of Commentary on Current
Economic Conditions by Federal Reserve District." Published eight times a year, the
report details information on current economic conditions in each Federal Reserve Bank
District through reports from bank and branch directors and interviews with key business
contacts, economists, market experts, and other sources.
Make Sales Support Organization-Wide
It's fine to informally encourage all your employees to generate more business, but nothing
beats hard and fast training.
Clerks, receptionists, repair technicians and delivery drivers are often in positions to spot
opportunities that your sales staff might overlook.
Here are four key changes you can make to turn
your entire staff into a sales support team:
1. Reserve a portion of company-wide staff
meetings to introduce new products and services.
Give your staff an idea of the types of customers
who might buy the items and why.
2. Teach employees to chat with customers in
ways that lead to increased sales. For example,
customer service representatives can sell additional
products or services based on customer queries - or
even complaints. What's more, a smooth,
professional response to a customer's problem can
lead to a long, profitable relationship.
3. Train your delivery team to ask customers a few
pointed questions based on the items customers are
receiving. Even shipping clerks can strike up brief,
productive conversations when they contact
customers to confirm the arrival of an order.
4. Show staff members how to record customer responses on a standard form or checklist to
give to the sales department. Consider awarding bonuses based on the profits from any
resulting sales.
Should You Cut Marketing Costs in Today's Economy?
In today's economy, many companies are experiencing lower sales and at the same time are
squeezed by increased postage costs and a variety of other financial pressures.
So, how do these companies plan to meet the
economic challenge? They may have to cut staff
and expenses. But a slow economy is usually not the
time to cut marketing.
In fact, one study by Penn State's College of Business,
found that a recession should actually prompt an
aggressive increase in marketing spending.
The study found that businesses entering a recession
with a pre-established strategic emphasis on marketing;
an entrepreneurial culture; and a sufficient reserve of
under-utilized workers, cash, and spare production capacity were best positioned to approach
recessions as opportunities to strengthen their competitive advantage.
Companies that increase marketing during hard times -- when competitors are cutting back -- can
generally boost both market share and return on investment.
Aggressive marketing can stimulate demand from new and existing customers. But this doesn't
mean simply throwing cash at marketing campaigns. You need to come up with smarter, more
targeted marketing strategies.
Historical examples of this include:



Proctor & Gamble pushing Ivory soap during the Great Depression.
Intel launching "Intel Inside" during the 1990 to 1991 recession.
Wal-Mart bombarding its rivals with Every Day Low Prices during the difficult economy of
2000 to 2001.
Few companies can afford to stop or cut back drastically on marketing -- no matter what the
economic conditions. New products can be revenue generators if marketed properly. Determine
what sets your business and its products or services apart from the competition and proactively
market your unique selling proposition.
Here are four suggestions on how to make the most of marketing during tough times:
1. Do more online and e-mail marketing. The high cost of postage, paper and printing is one
reason to turn to the Internet as a selling partner, rather than the post office. But there are other
good reasons: The affordable cost of online marketing, the ability to communicate with customers
on a one-to-one basis, faster results and better tracking capabilities. E-marketing is also more
environmentally-friendly. Other ideas:



During appointments and after trade shows, direct your sales force to steer
customers to documents posted on your Web site, rather than putting printed
four-color brochures in the mail.
Use keyword phrases in online content that cause your company's Web site to
rank higher in search engines so that more prospective customers come to you.
Use e-mail to communicate with existing customers and follow up with them.
Drive traffic to your Web site by including a link at the bottom of every company
e-mail message. Announce new products or offers by varying messages.

Use the Internet to test and tweak offers before offering them in a more
expensive marketing platform.
2. Search for media deals. During an economic slowdown, paid advertising rates often decline,
as media outlets start to feel the pinch. So you may be able to negotiate a great deal on space.
Consider opportunities for barter transactions. For example, a business short of cash may want to
make a trade and sharing in the arrangement conserves your company's cash flow. It is not
unusual to get more premium placement advertising during an economic downturn than when the
economy is thriving.
If you absolutely must reduce your marketing budget, try to maintain the frequency but shift to
smaller or shorter, less expensive ads.
3. Don't forget public relations. A PR campaign can complement a marketing campaign at a
reasonable cost. By using certain Web channels to distribute press releases, you can get
information out to more readers and get listed on search engines.
4. Anticipate how customers are likely to change their behavior and shift your marketing
message. Will your customers look for quantity discounts, postpone purchases, negotiate for
lower prices or trade down to less expensive products and services? Tailor your promotions and
marketing messages accordingly. Emphasize reliability, quality and value.
Bottom line: Companies have a better chance of weathering an economic storm if they look at
marketing as an investment and a potential opportunity rather than an expense.