14 Dec 09 So how long are we in this for? Part II

In my post So how long are we in this for? I reflected upon unemployment as a key indicator for strategists.  It is, after all, employment, or the lack of it, that could reshape human and therefore customer behaviour.

Well I have an update on the issue of unemployment or the question how long are we in this for.  I listened at the end of last week to a podcast given by Michael Mussa of the Peterson Institute[1] on the suject of the outlook for the US economy and the prospect of a jobless recovery.  Some key points from this podcast are:

• It will take from three to four years for unemplyment levels to reach 6%.  This assumes a “vigorous” recovery.  Note that the OECD expects that US unemployment will peak at 9.9% in 2010 and that pre-recession unemployment levels stood at 4.6%.
• It will take a decade to return to pre-recession unemployment levels.
• Recovery will entail higher levels of labour mobility.
• The construction sector is not coming back “anytime soon”.
• The automobile is, in employment terms, in secular decline.

This perspective reinforces the view that developed or “advanced” economies face seismic changes and that consumers attitudes will be reshaped across generations.

A similar perspective is taken (in respect of the UK) by Martin Wolf[2].  The depth (and duration) of the problems faced by the so called advanced economies has not yet received sufficient attention.

We have, in the developed world,  a long period of slow growth and uncertainty ahead.

We need to get out now and find out how needs and behaviours are changing amongst our customers and how, in turn, such shifts will impact our businesses.

This must be a key priority for 2010.

References
[1] Mussa, M A jobless recovery? Peterson Institute. Dec. 2009

[2] Wolf, M Britain’s Dismal Choice: Sharing the losses.  Financial Times.  Dec 15, 2009

Tags: attitudes, customer behaviour, recession

27 Nov 09 So how long are we in this for?

In terms of anyone who has an interest in strategy, a primary focal point must be customers’ behaviour and how it changes. As I have argued in my November Executive Briefing, 2010 and Beyond: The real issues and trends we are now entering the period when the behaviours, attitudes and needs (I will collectively refer to these as ‘behaviours’) of our current – and future – customers could be reshaped permanently.

My argument is that it is primarily the recession’s human impact that will, of course, drive long-term changes in behaviour. So my interest is measuring this human impact. One obvious pointer is of course unemployment. The first illustration shows the forecast percentage change in unemployment rates during the period 2009-2011 using 2007 as a base year. The underlying information source is November 2009 OECD forecast.

We can immediately see significant country to country variations, reflecting, I would argue, the macro-economic challenges thrown up by the crisis.

But this led me to consider a critical question from the perspective of changing customer behaviour – at a country level – how long are we in this for? The length of the recovery period – in terms of reducing unemployment levels appears key. The above OECD forecast goes out to 2011 – not far enough for this exercise. I am interested in estimating where:

(a) The peak unemployment rate is.
(b) The 66% recovery point is. In other words, ‘when we are through the worst of it?‘ – the point when broadly two-thirds of the lost jobs are recovered.
(c) The full recovery point is – when unemployment levels reduce to their pre-recession levels.

At this point I must make it clear that I am not an economist and I would therefore invite all readers (and please economists) to pitch in with their views. What follows is therefore highly, highly subjective but serves as a line in the sand. The illustration below gives my first guess. I have shown:

(i) The peak unemployment point (dark blue). This is based on OECD forecasts
(ii) The 66% employment recovery point – estimated – mid blue.
(iii) The full employment recovery point – estimated – light blue.

I have tried to reflect country specific problems in this illustration.

This reinforces the point clearly that things won’t be as they were before. Now is the new reality for many in the developed world. But most importantly, there is the real possibility of significant behavioural shifts. So 2010 and 2011 should be treated as years of exploration.

I would welcome your views in this important area.

Tags: customer behaviour, human impact, unemployment levels, unemployment rates