Here is a new fact of life: America’s economy is getting a little smaller. This “shrinkage” is likely to be a secular — as opposed to a cyclical — sets of changes.
Out goes the conspicuous consumption of the 1990s and 2000s . . . Lean and green is in; Grotesque and self-indulgent are out. Downsize that McMansion! Replace the SUV with something fuel efficient! Save instead of consume!
This is much more than a philosophical view — its what all of the economic data over the past year has been practically screaming.
In terms of actual data, here is what the new, leaner American economy looks like:
• Retail Stores: Have been hard hit; Many chains are filing bankruptcy (Circuit City, Linens ‘n Things Sharper Image, Steve & Barry’s Tweeter, Mervyn’s); The survivors (Starbucks, Macy’s, Sears, Office Depot) are closing stores — some, as many as 10-20% or more of exiting stores. Retail shopping will emerge from the recession with a much smaller footprint than before;
• Finance & Wall Street: The Street has been hard hit — look for much smaller revenue, with staff cuts of 25-35%. The safest players? Those with green P&Ls, and/or substantial assets under management. In employment peril? Everyone else.
• University Endowments: The intellectual engine of America’s brain trust has just taken an enormous hit to the frontal lobe: Harvard, Yale, Stanford, others are down -25% plus over the past 6 months alone. The big endowments fund Professorships, grants, student scholarships, pure research. The loss will be deeply felt over ensuing decades.
• Wages: US Wages have been punished by globailization, and have been stagnant over the past 10 years; Now, we are likely to see contractions in wages over the next 1-3 years;
• Media: Cirucaltion at major newspapers are falling; Its likely that 50% of print Newspapers will be gone (or web only) in 5 years; Will Fox Business channel, which launched just at the peak of the Stock market in 2007, manage to survive this onslaught? Less than even money.
• Pharmaceutical Industry: Huge R&D budget and staff cuts — 15 -20% — at several major pharmas (Pfizer’s huge research layoffs most recently) don’t bode well for new drug development and cures; Misallocated resources over the past decade, and lots of dead ends don’t help.
What is the sum total of all this? The US GDP will contract 4-6% 2008 Q4 – 2009 Q2; Down 1-3% for the second half 2009; And is possibly flat in 2010 —
Back in 2001, we had forecast the US Economy could hit $15 Trillion by 2010-11; That now gets pushed back to 2015-17 . . .