Proper Recovery Will Occur after Vaccine Dissemination, Says GSU Economist
Georgia State Forecaster Says “Proper” Recovery Will Occur Only After Full Vaccine Dissemination
ATLANTA–With vaccine rollout underway and picking up steam concurrent to emerging virus variants, Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business said recovery remains “an economic tango led by the virus. Reaching a sustained recovery by early 2022 is contingent on the speed and efficacy of vaccinations by mid-2021.”
“There is light at the end of the tunnel but it will take time, with ‘proper’ benefits to come as more people are vaccinated successfully,” Dhawan said. “We must relearn to walk before we can run again. This major biological shock rattled economic foundations.”
Assessing the past impact of stimulus payments, the forecaster pointed out that consumers spent them “rationally.”
“The most vulnerable who had to spend the checks last spring and this winter did so. Others who could afford to save, banked the funds or timed purchases to smoke out retailer incentives spurred by a Covid-19 sales slump in November and December.”
Consumer spending is beginning to return, with away-from-home food purchases up 4.4 percent, and sales of used cars and trucks up 10 percent year-over-year. Also rising: sales of watches and jewelry, which dropped 50 percent during the first two months of the pandemic. Today, watch and jewelry sales are up 20 percent over this time last year.
“Who’s buying all these watches and jewelry? We don’t know. But couples who have been confined together at home and perhaps postponed weddings, may be spending money they saved on peace offerings,” said Dhawan.
Proposed federal-level spending, immaterial of amount, will boost consumer spending for only a short while, followed by an inevitable reversion to the mean in subsequent quarters as stimulus funds run out.
“Real recovery will depend on people feeling comfortable interacting with each other – eating out, attending meetings, going to movies and concerts, and sightseeing,” said Dhawan.
Georgia and Atlanta did not take as hard a job-loss hit as the nation overall when the coronavirus shut down the economy in spring 2020. U.S. employment plunged 14 percent, compared to an 11 percent drop in Georgia. The area’s recovery also has been faster than the nation’s, which Dhawan attributed to Georgia’s relatively brief shutdown compared to the rest of the nation (notably California and Northeastern states).
“Today, the U.S. economy is down six percent by the employment metric, compared to only two percent in Georgia,” Dhawan said at a Feb 25 conference. “That sounds good until one takes a closer look at the performance of the state’s catalyst sectors of well-paying jobs, which is where job growth starts and the multiplier effect fuels downstream activity.”
The forecaster explained that the crucial catalyst sectors – corporate jobs, information technology, business services, manufacturing and transportation – experienced the same sharp eight percent drop in jobs in Georgia as experienced in the U.S. And when it came to recovery, Georgia has not outpaced the nation in this critical income generating category.
“Net-net, the overall job recovery deficit may be only 20 percent. But for high paying jobs it is close to 50 percent. Quality of jobs is a metric by which recovery still lags in the state,” said Dhawan.
One area where economic forces seem to be immaterial at the moment is homebuying, with more purchasers opting to buy single family homes further out instead of high-rise condominiums in the city’s core. How long this change in preference, or demand shock, will last is unknown.
“The rocket recovery of the stock market last spring that has continued into 2021, in conjunction with sharply falling mortgage rates, has helped consumers purchase homes.”
The Federal Reserve dropped its benchmark rate to near zero in March 2020, with subsequent quantitative measures to help shore up the mortgage market, making clear it will not raise rates until recovery fully takes hold.
“The Fed will stand pat until at least until 2023 or even later. But mortgage rates will start rising this year as the long-bond yield climbs in coming quarters. This is not just due to mild inflationary conditions expected from the consumer binge due to additional fiscal stimulus,” said Dhawan.
“The reason for a rise in bond yields is classic demand and supply of investable funds when looked at from a global perspective,” Dhawan said. “As we recover, and so does the rest of the world, rising demand for capital expenditures/investment spending by corporations that is a precursor to job growth will put upward pressure on mortgage interest rates.”
“Whether or not the housing boom continues and outlasts the coronavirus crisis hinges on stock market performance, which is a random factor in this recovery story,” said Dhawan.
Highlights from Rajeev Dhawan’s Economic Forecast
Nation
- Overall GDP growth will be 4.9 percent in 2021, 3.9 percent in 2022 and 2.9 percent in 2023.
- Investment growth will be only 7.2 percent in 2021, 5.4 percent in 2022 and 6.1 percent in 2023. Monthly job gains will be 298,000 in 2021, rise to 414,000 in 2022 and moderate to 202,900 in 2023.
- Housing starts will average 1.474 million in 2021, 1.339 million in 2022 and 1.272 million in 2023. Vehicle sales will average 16.7 million in 2021, 17.0 million in 2022 and 17.4 million in 2023.
- CPI inflation will be 2.3 percent in 2021, rise to 2.6 percent in 2022, and then moderate a bit to 2.4 percent in 2023. The 10-year bond rate will average 1.6 percent in 2021, 2.2 percent in 2022 and 2.6 percent in 2023.
Georgia and Atlanta
- Georgia will add 68,900 jobs (13,200 premium jobs) in 2021, gain a better 100,000 jobs (33,700 premium) in 2022 and increase by 77,100 (19,700 premium) in 2023.
- Nominal personal income will grow 4.0 percent in 2021, moderate to 0.6 percent in 2022 and rise 4.2 percent in 2023.
- Atlanta will add 54,000 jobs (11,900 premium positions) in 2021, grow by 86,600 jobs (29,400 premium) in 2022 and a further 64,900 jobs (17,000 premium) in 2023.
- Atlanta housing permitting activity will increase by 5.8 percent in 2021, decline mildly by 0.6 percent in 2022, then rise by 3.0 percent in 2023.
Affordable Care Act Enrollment Reopened
The Affordable Care Act Open Enrollment period has reopened (Feb 15 – May 15th)
By Bob Smith, GABB Affiliate and Licensed Health & Life Insurance Agent
It has been almost 12 months since we began experiencing challenges brought to bear by the COVID-19 virus. The challenges have been on multiple fronts leaving few people unscathed. Due to no fault of their own, many individuals have been impacted by business closures creating an unenviable reality of lost employer sponsored group health insurance. Being able to afford monthly premiums with the loss of income can make shopping for health insurance devastating. This at a time when being without health coverage can cause a family a medical and financial crisis.
The Federal Government recently addressed this potentially dire situation by reopening of the Affordable Care Act Open Enrollment period. Effective February 15 thru May 15 individuals have an opportunity to select health insurance on the Federal Marketplace at healthcare.gov. Subsidies based upon estimated 2021 income can lower monthly premiums making the health plans affordable during this difficult time.
No one can anticipate the unexpected and being without health insurance creates a vulnerable situation. In order to avoid the medical and financial consequences of an illness, accident or injury it’s important to be proactive before the window of opportunity closes.
Selecting coverage that addresses a family budget can present pitfalls while there are resources to help avoid making a mistake in the plan selection process. The process can be confusing when considering provider networks, copays, deductibles and out of pocket maximums, etc. With this in mind consider utilizing the services of a licensed Georgia Insurance Agent who also has been certified by the Federal Government to represent the insurance companies on the Marketplace. In most cases the services provided by agents is at no cost to individuals as they are compensated by the insurance companies.
The Affordable Care Act Open Enrollment will end on May 15 for plans issued June 1, and applications submitted in March will be issued in May. The time to be proactive to secure health insurance is now.
Bob Smith, Licensed Health & Life Insurance Agent
Bob@BobCaresForYou.com
www.BobCaresForyou.com
404-593-9663
Read More
Buying and Selling Businesses in a Pandemic: GABB Feb. 23
Despite the challenges posed by the pandemic in 2020, many Georgia business brokers continued to sell more than a million dollars worth of businesses. GABB board member Tanya Nebo and six members of the GABB Million Dollar Club offered a wide variety of advice on Tuesday, Feb. 23, during a panel discussion of how to buy and sell businesses during a pandemic.
To view their comments on how they prospered in 2020, watch this video posted on GABB’s new YouTube channel.
Among the 2020 members of the GABB’s Million Dollar Club who will be on hand on Feb. 23 are Jefffery Merry, senior business analyst at the BUSINESS HOUSE, inc.; J. Snypp, Vice President of Preferred Business Brokers, Inc.; Matt Wochele, founder of Preferred Business Brokers, Inc.; Rob Margeton, an M&A Intermediary with Ryco Advisors, LLC; Brian Judson, a business broker with Best Business Brokers; and Jon Roman, business intermediary, franchise consultant and developer at Transworld Business Advisors.
Ms. Nebo is both a business broker and an attorney. Her law practice, real estate agent and business brokerage services focus on commercial real estate, franchising and general business matters (including joint ventures and equity participation models). She is a graduate of Columbia University in New York and the University of Virginia School of Law.
The GABB is the state’s premier association of professionals who help in the purchase and sale of businesses. GABB is committed to promoting professionalism, education and high ethical standards in the profession of business brokering.
For more information, contact GABB President Judy Mims at 404-842-1997 or judy@childcare.properties, or Ms. Loupe at diane.loupe@gabb.org or 770-744-3639.
Read More3 Steps for Achieving Pricing Power
The simple fact is that most of us want to control our own fate. This fact is especially true for entrepreneurs and business owners. However, the truth of the matter is that for most business owners, their fate isn’t completely in their own hands. For example, a variety of forces can prevent businesses from establishing their own prices.
Knowing whether or not your company has pricing power is essential and can influence a range of decisions that you may make. Let’s take a closer look at what steps you can take to control your own pricing.
What is Pricing Power?
This economic term describes the effect of a change in a product price on the demanded quantity of said product. Your company’s pricing power is linked to the demand for your products or services. If you have a high level of pricing power, you can raise your prices over time and maintain your customers.
Who Has the Greatest Pricing Power?
It is no great secret that the Amazons, Apples, Wal-Marts and auto manufacturers of the world exercise a tremendous amount of power. Part of this considerable, and seemingly ever growing, power resides in the fact that the size of these companies now rivals and even surpasses many nation states. This grand level of power is unique in human history in many ways. Along with it comes the ability to exercise an almost god-like authority over suppliers.
Today, these ultra-powerful companies commonly dictate to vendors what prices they are willing to pay, and the quasi-monopolistic nature of these companies often leaves vendors with no choice to comply. In short, these 900-pound gorillas are telling companies both large and small exactly how much they will pay for a given number of bananas.
Step 1 – Providing a Branded Product or Service
If you discover that your company doesn’t have pricing power, there are steps you can take. One step is to produce a branded product or service. In this way, you are able to offer something of greater value than your competitors. Through having a branded product or service, it is possible to create a higher perceived value in the minds of not just the Amazons of the world, but in the minds of consumers as well.
Step 2 – Innovating
Another path towards achieving pricing power is through innovation. A great example of leading the way in innovation is Apple. While few companies have Apple’s almost ethereal resources, that is not to say that you cannot find ways to innovate within your own sphere or industry. Small innovations can often have an outsized impact and help a business stand out from a crowded playing field. Innovation that leads to patent production is an excellent way to gain a degree of pricing power.
Step 3 – Offering Exceptional Service
A third option for achieving a degree of pricing power is to provide what could be called “mind-blowing” service. By providing service that is truly a cut above what the competitors can match, your company is positioned to achieve pricing power. Providing your customers with something they simply can’t get elsewhere is a key way to setting a price that is more in line with what you desire.
There are many marketplace variables that your business can’t control. The trick is to evaluate your business, your business’s potential and the concrete and practical steps you can take starting today to achieve pricing power.
Copyright: Business Brokerage Press, Inc.
The post 3 Steps for Achieving Pricing Power appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
John Warrillow’s The Art of Selling Your Business
Business owners should skip trying to find the perfect “magical time” to sell their business, advises John Warrillow in his latest book.
In The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting on Top,” Warrillow strongly recommends that “the best time to sell your company is not during some mysterious macroeconomic environment. It is when someone is willing to buy it and you get an offer. And that is because at that point, you’re in the position of strength.” This book was released on January 12th, 2021 and is proving to be invaluable for business owners.
Warrillow is the founder of The Value Builder System which features 12 modules that form a sequential process for building the value of a client’s business. While not a business broker himself, Warrillow has gathered considerable knowledge and expertise on the industry. The Art of Selling Your Business: Winning Strategies & Secret Hacks for Exiting on Top is the last in a trilogy of books by Warrillow on building value. The first, Built to Sell, rated as one of 20011’s best books, encouraged small business owners to begin thinking about their business as more than just a job. The Automatic Customer tagged recurring revenue as the core element in a valuable company and provided a blueprint for transforming almost any business into one with an ongoing annuity stream.
Selling When the Time is Right
What’s the secret for harvesting the value you’ve created when it’s time to sell? The Art of Selling Your Business answers important questions facing any founder, including—
- What’s your business worth?
- When’s the best time to sell?
- How do you create a bidding war?
- How can you position your company to maximize its attractiveness?
- Who will pay the most for your business?
- What’s the secret for punching above your weight in a negotiation to sell your company?
The DIY Approach
Business owners truly need to work with an intermediary if they are to achieve optimal results, Warrillow emphasizes. He even includes his six reasons for why every business owner should hire a business broker or M&A advisor.
Many business owners think that they can handle selling their business on their own. But most business owners have no experience in selling a business. Add this to the fact that selling their business is likely to be the most important financial decision the business owner ever makes, and it quickly becomes clear that business owners are doing themselves a considerable disservice when they opt to handle everything on their own.
A Business Broker vs. a Lawyer
As Warrillow notes, business owners think that instead of working with a business broker or M&A advisor, they can turn to a trusted lawyer who has served them in the past. But this thinking doesn’t work well when selling a business. As Warrillow states, “a lawyer, almost by default, is going to be very conservative as everything exposes a lawyer to risk. And that is why using a traditional attorney is almost always a mistake.”
If you are planning to sell your business now or in the future, a book like Warrillow’s The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting on Top can serve as a valuable tool in your toolbox.
Copyright: Business Brokerage Press, Inc.
The post John Warrillow’s The Art of Selling Your Business appeared first on Deal Studio – Automate, accelerate and elevate your deal making.