Wednesday, March 30, 2011

Managing Despair

Once we get past the endlessly repeated and pained assertion by government that the economy is "on the mend," we run headlong into what we'll call the "facts," because that is what they are . . .

- January home prices fell for the sixth month in a row, edging closer to a double dip. The S&P/Case-Shiller home price index covering 20 major markets fell 3.1% year-over-year, hovering near the market's bottom set in April 2009. Sales of existing homes were off nearly 10% in February and new homes sales were at a record low. Because most employees have most of their "wealth" (to use the term loosely) tied up in their dwellings, this does not come as good news.

- The U.S. Conference Board Consumer Confidence Index declined in March to 63.4 (1985=100) from 72.0 in February. Why? The American employee has reached desperation level when it comes to expectations. Inflation expectations rose significantly in March and income expectations soured, "a combination that will likely impact spending decisions,” according to the Conference Board. The percentage of consumers expecting rising incomes declined to 15.3 from 17.4 per cent. Because household spending accounts for 70 per cent of U.S. gross domestic product, it matters.

- The real unemployment rate is something in the neighborhood of 22%. The 9.5% number promoted by the Fed is created from whole cloth. 22% reflects current unemployment reporting methodology adjusted for long-term discouraged workers who were defined out of official existence in 1994. The fact is they are with us.

- The Consumer Price Index is another number manipulated by government until it means nothing. True inflation in the US is currently something over 8%, taking into account both food and fuel which almost everyone uses.

Bottom line? If you add up inflation expectations, consumer confidence and unemployment, you get Misery. Indeed, the Misery Index (inflation plus unemployment), would now be at an all time high if the government were up to shooting straight with the numbers, which it is not. Perhaps the record food stamp usage month after month is the most telling statistic of how tough it really is out there.

Now, here's the punchline employers -- ready?

Employees know all this, they feel it, even if they might not be able to recite the statistics and even if they don't tell you. They are the ones having to buy cheaper, often less nutrition foods for their families, the ones who have a hard time putting enough gas in their cars to get to work everyday, the ones who make sacrifices they never believed were in the cards. They smile everyday but live in fear.

Answers? Not many. Most employers are not good at delivering bad news, having been trained to spin the bad into good, often raising expectations that are later shattered when the quarterly numbers crumble under the weight of a struggling economy. Better to present bad news as bad news, help them understand WHY things are happening they way are happening and, if true, share how YOU have shared the pain.

Under the heading of DON'T EVEN THINK ABOUT IT, please don't put lipstick on the pig. It makes you look silly, disingenuous and many will believe you are lying. Some in corporate America are so far out of touch with the suffering, they paint the problem as one of "employee attitude," and offer up such inanities as motivational talks to remedy their productivity problems. As one employee who was demoted and suffered a pay decrease aptly described it, "Putting up a motivational speaker up there in times like this is like offering a hand job to someone whose soul is dying." (Thanks to Barbara Ehrenreich for that descriptive bit of wisdom.)

Thought: Call if you need help in producing your next executive address. It may not be "motivational," but it will be effective, honest, straightforward, and provide realistic expectations for those who hang on your every word.


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