Businesses need to take action now against recession

 

 

The United States will be entering a more severe phase of the recession in 2009, and Connecticut ”“ especially Fairfield County ”“ is expected to be hit hard. In order to weather the storm, businesses need to evaluate their current situation and take actions to cut costs and operate as lean as possible. For some businesses, tough economic times create opportunities. If they have the foresight and wherewithal to capitalize on them, those companies will flourish and emerge from the recession stronger and more resilient.

 

The financial meltdown taking place on Wall Street and spreading around the globe has come at a time when the economy was already weakened by serious housing downturns. Fairfield County, which relies on high-priced real estate and the jobs and wealth generated by the financial services industry, will be among the areas most adversely affected. Job losses in New York City”™s financial markets may hit 100,000 and, according to some economists, Connecticut could lose more than 60,000 jobs. If that happens, 30,000 Fairfield County residents could be out of work between now and the end of 2009, further weakening the county”™s housing, construction, financial services, retail and government finance sectors.

 

A large number of job losses would put additional strain on the county”™s already overstocked housing market as laid-off workers try to sell their homes. The construction industry, on the other hand, may get some good news, as several government projects may receive federal assistance. The bad news, however, is that commercial and residential construction is expected to weaken.

The financial services sector will improve its lending services, especially in areas like commercial paper, which has been among the hardest hit. But even with improvement, the financial industry will continue to suffer from damaged investor confidence.

 

The retail sector is expecting a tough holiday shopping season and an even tougher aftermath. Consumer confidence remains low, and with residents already stretching their budgets to afford higher prices for everything from groceries to utilities, disposable income is shrinking. Consumers will spend, but they”™re expected to do so cautiously and in smaller amounts.

 

Government finances will suffer not only from income tax shortfalls, but also from weak sales tax and property tax receipts.

 

Areas that have typically not been affected by the economic slowdown ”“ commercial real estate, for example ”“ may see future fallout from retail and financial services woes.

 

Exports, which have been very strong, will continue to do well but will weaken due to global economic malaise. If exporters see a downturn, it may not happen until late 2009.

 

All of these economic issues present serious challenges for the business community. Businesses need to focus on basic standards of practice to manage their companies and safeguard their cash flow. They need to actively communicate with their lenders, customers, and vendors to secure lines of credit and ascertain the credit worthiness of customers and stability of their own supply chains. Getting paid on time will become increasingly challenging.

 

Out of the economic gloom, however, will come opportunity ”“ at least for some. For the first time in over a decade, highly trained, quality workers will be available for many firms that have been unable to find the skilled labor needed to grow their businesses. Although some companies will not survive, their customers will remain, providing opportunities for savvy, nimble firms to boost market share. Companies that maintain their bottom line while adding top performers and new customers will emerge stronger from the downturn.

 

Peter Gioia is vice president and economist with the Connecticut Business & Industry Association.