Economically Speaking…

Posted by Richard Jacobson

(a follow-up post to the 2010 Impact Survey results)

Much like our actuarial friends, my comfort level is greatest with the ‘evidentiary’ or hard sciences – this is why I obtained a degree in mechanical engineering in my younger days. I am least comfortable with the softer social sciences and am certainly not by nature an economist. I do, however, consider myself a student of politics, current events and of history; and I truly enjoy hearing many sides of an issue. Like many among us, back in 2007, as Northern Rock was toppling and the credit market was beginning to seize up, my interest turned to the economy and its fundamental drivers. Thus, I have read and watched and listened to quite a bit about what we are currently going through. For the most part, this post is going to be my recommendations on where one might find some interesting (and I feel compelling) perspectives; but first I will provide an update from the front lines of the insurance industry labor market with no suggestions that our view has broad implications.

Economically speaking...

Back in October, I mentioned this study by the American Staffing Association and the statistical links between GDP performance, temporary staffing growth and employment growth. Well, from the micro perspective of one mid-market firm, the links are holding up this time around again. In October, I referenced the marked increase in order activity that began in September within our three temporary staffing business units. Aside from an expected lull around the holidays, this higher level of activity continued through December and then accelerated quite a bit in January. Interestingly, January also saw a significant improvement in our executive search and professional recruiting businesses. In fact, our new search bookings reached their highest level in 18 months. So far, the script is playing out as one would expect based upon the historic patterns as evidenced in the ASA study.

For other, more accomplished perspectives on the economy and where we go from here, the following are my recommendations:

  • One of my survey participants referenced Nassim Taleb’s "The Black Swan” and suggested that Mr. Taleb would believe I had asked the wrong question – ironically this was one of the first books I tackled back in 2007. If you haven’t read it, I highly recommend it as a unique and thought-provoking perspective on the world in which we all live. Mr. Taleb also has an ongoing blog, though I understand that he is not currently posting in part due to his frustration over the recent reconfirmation of Ben Bernanke.

  • I found Carmen Reinhart and Ken Rogoff’s “This Time is Different: Eight Centuries of Financial Folly” to be a very readable, data-driven survey of financial crises. Their approach is to lay out the data facts in clear terms with very little unsubstantiated opinion. Their follow-up into what happens after financial crises serves as a stark warning of the dangers of mistaken policy over the next several years – we cannot allow a consumer debt crisis to simply be replaced by a sovereign debt crisis.

  • If you are looking for a more narrative overview of financial crises and their aftermaths, “Devil Take the Hindmost: A History of Financial Speculation” by Edward Chancellor was very readable and educational.

  • Back in May of 2008, as the ‘subprime crisis’ was morphing into something much larger and uglier, NPR’s “This American Life” ran a show entitled “The Giant Pool of Money” that provided a very well-researched overview of what had happened and was happening in the subprime market. I believe this became one of the most popular episodes of an incredibly popular radio series (“TAL” is currently the most popular podcast in the country). From this episode, NPR spawned a new podcast in late 2008 called “Planet Money,” which is a non-economist look at all things economist. Some episodes are lacking; but overall this is a well-researched and worthwhile podcast and they have had some very accomplished guests.

  • Finally, if you want to see an entertaining overview of the competing Keynesian and Austrian School viewpoints, take a look at this very funny video.

I’ll finish up by saying that I have heard, read and learned many different viewpoints on where we go from here (the above is only a small sample). There are some very bearish views with very compelling stories. I am aware of these perspectives and give them their due respect; but personally I am very optimistic that this great country is on the mend and that the brightest days for our economy are in the future. Challenges lay ahead, but so does opportunity.

I welcome comments and any of your recommendations.