The Business Cycle is Laboring to Maintain Steam

This upcoming Labor Day weekend, think how a change in economic conditions might impact your personal situation. Are you working in an industry that is prone to layoffs during a recession and are wondering if a recession is around the corner? Do you own your own business and are wondering if now is a good time to expand operations? Are you a middle manager in a large corporation wondering if you should swing for the fences, or take a defensive position?

All of these are good questions the we should all ask ourselves. A three-day weekend is a good time to take stock of our situation an address any potential risk areas head on. Like a hurricane in the southeast teaches us, it is better to be prepared for things that we all know are coming. The last recession, also known as “The Great Recession,” lasted from 2007-2009 and per economic experts was the worst ever. It is already 2017 and we should all be asking ourselves, when is the next one coming?

One clue should be layoffs. Layoffs are a lever that business managers pull to maintain profits when the business is not making as much money as it used to. This shortage in revenue can be due to any number of causes: more competition in the industry, increases is costs of parts and materials used in production, increases in labor costs due to negotiated bargaining contracts, etc. The point is, when management sees labor as a cost and seeks to minimize it, then layoffs increase. When layoffs increase, the economy slows down.

Layoffs are occurring at a rapid rate in the retail industry, as retailers respond to Amazon’s ability to supply products with speed and efficiency. Amazon has become the Walmart of online retail, and this is not a coincidence. Jeff Bezos, the Chairman and CEO of Amazon, is a student of Sam Walton, and it has been said that he carries around Sam Walton’s personal memoir “Made in America.”