What Does the Big Picture Mean For Me?
October 1, 2021
You have an understanding of where your industry is headed and how the economy is performing - but now what does that mean for you and your business? Catch our newest TrendsTalk episode with ITR Economist and Speaker Lauren Saidel-Baker to learn more.
The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.
Hi, I'm Lauren Saidel-Baker, and welcome to this episode of ITR Economics TrendsTalk. I was speaking at an event recently and after my presentation, one of the attendees came up and he said, "Lauren, thank you for that information, but I have to admit I'm just a little surprised." He said, "I've heard an economist speak before and after he spoke, my head was swimming with numbers. And today I couldn't quote a single number from your whole talk." And I told him that was a great compliment that I was proud of that. We don't ever want our ITR presentations to be a data dump. We find that it usually doesn't matter a whole lot if one number is 5.8% or 5.9%. That's really not what we're focused on. We want to focus on the big picture on the story, the direction of where the economy's headed from here, not to have you quote the current inflation rate or some other rate of change. We really want to see the big picture.
So this attendee, he said, "That's all great and I love to have this vision of the future, this outlook, but my question that I have to go decide is what does this mean for me?" Now, that's a hard question to answer. For most folks right now, it should be good news. Our macro-economy is on the med where we're rebounding, starting to grow again. And we have a fairly optimistic growth outlook here at ITR. So for most listeners, this should come as good news for you. But not for everyone. If you're in the consumer sector, you've probably been feeling that great consumer strength, that rapid rebound, that return of demand, but for others, say, if you're in non-residential construction, for example, the cycle's a little bit different. In fact, our rates of change for non-res construction are only just now starting to rise. We're still very close to the trough of this business cycle. So it doesn't feel quite so good.
Now, ITR is always here to help you determine what this means for you. So please do give us a call and we'll have those conversations, but first I'd encourage you to take a step back and to use the framework to determine what any given trend might mean for you. By that framework, I mean calculating your rates of change, calculating the rates of change of your sector, your industry, the economy as a whole, and to use those leading economic indicators to see what comes next.
But there are two main things that you should remember as you're running through that exercise. The first is that there are two sides to every coin. So what any given trend means to you just depends on which side of the table you're sitting on. I think one great example of this right now is the labor market. Our domestic labor market is so tight. Competition for workers is so fierce right now that as a result, we're seeing a much lower unemployment rate and we also see increase in wage inflation. It's costing more. Businesses are having to increase their wages and benefits to hire these folks, to attract them.
So for businesses, what that means for them is probably a little tougher. If you're a hiring manager, this isn't a great trend. You're having tougher competition. You're having to really pay up for talent. But if you're on the other side of that table, if you're a worker, an employee, that means more people are making more money. More people are employed, wages are rising. So for the overall US consumer, this is probably a good sign. It means something positive for them. And with gross domestic product being driven about two thirds by consumer spending, that is in net a benefit for our economy. It's going to support our growth going forward, but it just depends where you fall in that negotiation.
The second main thing to remember is that any given trend can be good or bad, but you can usually use it to your advantage as long as you're willing to be flexible and to find the opportunities. A great example of this right now is office construction. For people who build office buildings, well, we're all working from home, working remotely. We probably don't need the same number of offices as we did a few years ago. But if you're willing to pivot, if you're willing to find the growth trend within that office construction sector, you might look to server rooms and data firms. These technological needs to be doing these types of remote work scenarios, they take a lot more tech. And the subsector of office construction that concerns itself with IT, with data centers and server rooms, that segment is growing. So maybe you're not constructing a cube room anymore, but maybe you're constructing a server space. And you can find that opportunity.
Because in the end, only you can determine what any economic trend means to you. And it's all about how you use that outlook, how you use these forecasts to inform your business decisions. We have a management objective framework that we think puts a little context to this. If you can determine your rate of change, determine where you are in the business cycle, those management objectives, they give you something to think about. Kind of a checklist of what have I considered and what should I be considering? Because even if we had a perfect crystal ball, if you don't take action based on these trends, then it probably doesn't mean much to you anyway.
Thank you for joining me today for this episode of ITR Economics TrendsTalk. I'm Lauren Saidel-Baker. Let's talk again soon.