Many economic forecasts are stating that the national economy is heading into a recession. What is interesting about these predictions is that the economy has not evidenced the two consecutive quarters of negative economic growth that define a recession. On the contrary, the national economy has experienced positive growth for the past eight years including the past two economic quarters for this year.
So why all the concern?The concern is that premature and unsubstantiated economic forecasts may be a causal factor of recessionary development. Economic forecasting has evolved into a game in which many economists attempt to be the first to predict an economic downturn despite the lack of confirming data. Such predictions stimulate a negative business atmosphere and add to the build up of a recession mentality that may become a self-fulfilling prophecy.
All unsubstantiated predictions of recession should therefore be referred to as "economic toadyisms."
Economic toadyism is derived from the word "toady," which was the name given to ancient magician assistants. These assistants or "toadies" had the unenviable job of eating live toads so that the master magician could prove his miraculous healing powers - toads were considered poisonous at the time. Such magical displays held all in awe at the magician's talent but created a rather negative experience for the toad eater.
Economic toadyisms may be a primary contributing factor in creating some economic downturns, which adds to the "toad eating" experience for many small businesses.
Recent economic data compiled by Gary Meyers of the Meyers report indicates that the economy may be slowing but is not dead:
Unemployment - Is at 5.7 percent, barely higher than what was considered full employment only a few years ago.
Gross National Product for the third quarter had a growth rate of 1.7 percent
Personal Income - continued to increase in October, but only 0.12 percent,the smallest monthly increase since July of 1989. However, at $4.71 trillion, October income is up 2.4 percent from six months ago and 6.1 percent from a year ago.
Durable Goods - orders and shipments were both up in October. New orders were up 3.6 percent to a level of $129.5 billion, 4.7 percent above six months ago and 4.2 percent higher than one year ago.
The subject data illustrates that the economy is still generating meaningful growth in the production of goods and services.
The primary cause of the rash of negative economic forecasts has been the steep climb of oil prices instigated by the gulf crisis. Small business should not be railroaded into believing that the current conditions require an economic retrenchment. Indeed if the gulf situation is resolved, the price of oil is predicted to return to the $18-$22 a barrel level.
Every small business must monitor its own industry and economic condition and not rely upon general broad economic toadyisms, which can place the economy in a lockstep toward recession.