The United States of America’s economy is the world’s largest and most technologically powerful, which records a per capita Gross Domestic Product of $46,000. The US firms, industries, or companies have been in the frontline in adopting current technological advances in their operations, a good example being in computers. For any business to succeed, effective professional and technical skills are very necessary. This has increased the demand for computer-based skills and equipment by business enterprises in the USA and in the world over. There have been controversies on whether the USA economy is going into recession, where business analysts and economists have given contradicting sentiments. While some analysts have said that the economy is in recession, others have denied this.
In the United States, an official ruling on whether the economy is in a recession is given by the National Bureau of Economic Research. However, this ruling has not been made, which leaves the business enterprises with no other option but to depend on the economists/business analysts’ views to establish the economic situation in the country. An economy that is in recession has a significant decline in economic activity, a situation that usually spreads across the economy. This situation can last for more than several months. A recession assessment is based on the final figures on the industrial product, personal income, employment, as well as the manufacturing and retail sectors’ sales activity. Currently, the USA economy is already experiencing a certain level of recession. Though the economy’s recession has not been fully established, some sectors of the economy are already feeling its pressure. Even though a full-blown recession has not been experienced, there are very strong signs that the economy is experiencing problems that may soon drive it into a recession.
Has the economy actually entered into a recession as of today?
One way in which the economy is experiencing recession is in the increasing jobless rate. The US unemployment rate has been observed to rise at its fastest rate in the last two decades. By May 2008, the US unemployment rate reached 5.5%, a situation that has given indication that the US economy is already experiencing a recession. The rate increased from 5% to 5.5%, providing a clear indication that the nation’s economy has slowed down. The US companies have become more reluctant to hire employees, and their profits are being squeezed by the consumer slow down. According to the US labor department, the US economy has already lost 49,000 non-farm jobs (www.chinadaily.com.cn/world/2007-09/13/content-6101963.htm).
Business analysts have said that with the increasing rate of unemployment in the USA, the economy is sliding towards a higher level of recession. The unemployment rate results in a weak labor market, which makes the consumers rein in their spending, which in turn hurts the corporate profits. For instance, in the New York Stock Market, poor data has even affected the stock market. The blue-chip Dow Jones Index has slid 1-79% (225.70 points) to 12378.75 points. The increasing rate of unemployment has made the cost of living to rise, with consumer spending slowing down. The loss of purchasing power of the consumers greatly affects the US consumer-driven economy. In addition to unemployment, Americans are experiencing falling house prices, a credit squeeze, and rising fuel bills. According to Gilles Moec, who is an analyst at the Bank of America in the USA, ensuring that inflation does not get out of control is the only way that the already experienced recession can be handled. Furthermore, consumer spending requires to be increased by a low cost of living. Another economist, Bert Macintosh, Chief economist at Eaton Vance Management, asserts that the unemployment rate only gives a weaker economic outlook than the payrolls number.
Another indicator of a recession is the soaring global fuel prices. The global fuel prices have increased, pushing the US inflation. According to the government’s figures, very high energy costs are being experienced, with consumer prices rising by 0.6% since last November. The global cost of oil, which recently reached more than $139 a barrel, has increased the petrol costs by over 5.7%. The rising inflation has resulted in to cut rate by the Federal Reserve in order to stimulate economic growth. The inflation rate in May 2008 reached 4.2%, which was above the expectations of the business analysts. However, some business analysts do not see the rising inflation as a threat to the US economy so as to drive it into complete recession. The analysts are of the opinion that the price inflation is largely confined to energy but not to the overall US economy. One analyst Lindsey Piegza from FTN Financial, supported this.
The food prices have risen both in the USA and in other countries all over the world. For instance, food prices in the US have risen by over 0.3%. The world’s food prices are hurting economies around the world, and the USA is not an exception. Consumer spending has been affected by the high prices of goods and services. The soaring fuel and food prices have made US producer prices go up. Compared to the producer prices one year ago, the US current producer prices have risen by 7.2%. The producers are now in a situation where they may be forced to raise prices so that the prices can limit the impact from soaring fuel and food prices. The analysts view this move by the companies as one that will pass so much to the consumer before the companies’ profits are affected negatively. The companies are expected to increase prices in the coming months in order to compensate for the increasing global fuel and food shortages, according to Keith Hembre, who is the Chief Economist at FAF Advisers. Alternatively, if the companies fail to do so, their profits will be eaten up by high costs, which will affect economic growth.
A study by economists at the University of California in Los Angeles indicated that the US economy was expected to get a near recession from September 2007 and the beginning of 2008. The expected economic performance left no doubt that if the economy was not in recession, it was most likely to be in a recession later. The economic slowdown of one percent was predicted to result in a recession. The economy, as predicted, is experiencing a certain level of recession, though it has been estimated to bounce back to normal levels in 2009. The analysts/economists continue to show optimism that the economy will avoid a full-blown recession.
The political opinion of the United States has affected its economy. The September 11 terrorist bomb attack resulted in economic resilience, which has affected the economy’s growth up to now. Another political conflict that resulted in the nation’s war against Iraq made the national resources be channeled towards funding the military attacks in the US war against Iraq in March-April 2003. The US economy has lost business investments from nations that consider it a political enemy. The economy is suffering from inadequate economic infrastructure, budget deficits, rising medical and pension costs of the aging population, and stagnant low family income in low-economic groups. The reduction in value and status of the American dollar worldwide since 2007 has also affected the economy.
A study carried out in 2008 was a strong indication that the Americans see their economy as being in recession or depression. The study by Institute for Supply Management report indicated this (www.gallup.com/poll/104212/many-consumers-see-Recession-Depression.aspx-). A study carried out in Jan 2008 showed that American citizens are already experiencing the recession. According to a Gallup poll, about 46 % of the American citizens supported the notion that the economy is experiencing signs of a recession (slowing down). Another 33% asserted that the economy was experiencing a recession, and 12% depression. Only 7% said that the economy was growing. This is shown in the graph below.
Another study that was conducted based on how much a person earns indicated clearly how the level of income creates the difference in views about the economy. A higher percentage of low-income earners are convinced that the economy is undergoing serious problems (depression) compared to the upper-income earners. Six people out of ten, who earn less than $20,000 annually, said that the economy was experiencing recession or depression. One out of four people (27%) asserted that the economy is under depression. In addition, 31% of those earning at least $75,00 a year also stated that the economy is experiencing a recession, while 8% said it was under depression. The graph below indicates this.
What impact will current economic conditions have on our training business?
The United States’ powerful economy is supported by modern technological developments that are seen in its industries, companies, and many other different business enterprises. A recession often leads to a decline in the economic activity of the nation. The US economy is experiencing a recession to some extent, a situation that affects the Information Technology sector, as well as the computer training business in the country. The current economic condition in America will impact both positively and negatively on the IT and computer training business. However, positive impacts on computer training will be higher than the negative impacts.
The computer training business revenue is likely to remain the same for the time being, but it is expected to increase slightly due to the current USA economic conditions. Currently, though the economy is experiencing a recession, IT and computer training has not experienced a recession yet (McGee. 2008. www.gartner.com/DisplayDocument?id=594710-).
However, business analysts have predicted that there are various ways in which the sector may be affected, either positively or negatively. This is because the issue of whether business revenue increases, remains stagnant, or decreases in the IT and computer sector depends on the concerned companies’ management strategies to cope with the economic problems. Consumer spending due to a recession may not have a great impact on the computer training company’s revenue. One reason is due to the past recession experiences in the USA. The recessions have never lasted for more than eight months, and based on this fact, the economy’s recession is not expected to create great economic problems in the IT sector. In addition, the recent monetary, fiscal and political actions may prevent the economy from getting into a full-blown recession. It is therefore expected that the computer training business will continue receiving clients, a situation that will promote revenue-generation by the company leveled. However, revenue from the business may go up due to the economic changes that are more likely to increase the demand for IT equipment, services, and skills.
This is because though consumer spending has decreased and purchasing power has declined, the people’s need to develop cost-effective means of saving and earning money has encouraged them to adopt IT and computer use in their activities. The companies are experiencing increasing food and fuel prices, making them increase the price of their products. In order to generate maximum profits in the production and marketing of commodities in the modern world, the companies are required to market their products to as many consumers as possible while at the same time cutting down on production costs. In trying to cut production costs and maximize profits, both the companies and individual entrepreneurs are now seeking technology that will enable them to increase production over a very short time. Equipment and skills that are necessary to do this can only be provided by the IT and computer training sectors. Therefore, the fast and increased demand for information technology knowledge and skills in the business world is expected to increase. This will result in a high number of clients enrolling to train in information technology courses, computer programming, web design, and database management. The training will assist the companies in developing strategies that will enable them to survive the predicted tough economic situations. For instance, new courses in technology are being developed while new equipment is being invented to be used in business. Another area is the development of recession-proof business, which provides a great opportunity for the IT and computer training business to offer training services to the clients. Some examples of ways in which the IT and computer training demand has gone high is through the much-demanded business recession-proof programs. The recession-proof programs that aim at making and saving money online are already receiving a positive response from the people. This will no doubt increase revenue. More and more people have shown interest in undertaking online business activities that maximize one’s returns. The recession-proof business plan on how to do affiliate marketing is an offer by the information technology sector to assist companies in increasing their returns. Individual ways of making money with little capital have led to the development of online packages to boost one’s income. One example is the plan that enables one to start an internet TV station for less than $500. With such attractive business opportunities on the internet, the demand for IT knowledge is expected to increase.
However, the full-blown recession may decrease the demand for computer training courses and IT, not because the courses are irrelevant, but if the cost of living increases greatly and economic growth fails to grow completely. The clients may experience financial difficulties, which may force them to use the little they have for other needs.
What contingency plan should we set up to deal with the possibility of reduced business activity in our company?
In order to deal with the possibility of reduced business activity in the company, there is a need for the company to develop a contingency plan. The company’s contingency plan will need to address the unemployment condition in the country, the employee skills, and the changing technological trends.
To address the already experienced problem of unemployment, the company will require developing measures that will attract clients across the income range, even those with declining incomes. As earlier stated, the US economic recession has been characterized by an increasing rate of unemployment which has reduced consumer spending and has raised the cost of living. Computer Training will require the company to provide knowledge and skills to people within the various classes of income-earning (high-class, middle-class, and low-class income earners). The programs taught will need to be affordable to people who belong to these three classes of people. A training program will integrate computer courses that will be provided at various affordable costs. The clients can therefore select the courses based on what they can be able to afford. The training courses should be offered at lower costs for small businesses, while corporate clients who have a greater financial ability can be offered the course at a much higher cost.
Self-paying individuals will also need to be considered so that low-earners can also be able to acquire the much-needed computer skills. Some of the unemployed people usually seek computer skills to satisfy the employers who prefer candidates conversant with information technology developments. The company will try to win these clients by developing courses that address the employer’s needs so that those seeking jobs can enroll in the courses in high numbers. For the already existing clients, the company will develop means of informing them about the ongoing influences on IT and computer training. This will be very instrumental in empowering the clients to keep abreast with changes. This will also demand changes in their company’s management strategies to match the clients changing needs and the global market changes. The company will be able to maintain its clients and win more through its measures to offer training to the clients, and also act as an advisor to the clients on the best courses to take at particular times. The company will provide postings on its websites to inform the clients and potential clients of changes in their programs and training courses. Information will also be given on the website to explain to the clients how the developed courses are relevant in the modern business world, to enable the clients to solve problems arising from economic constraints.
The company employees will require on-job training so that their knowledge and skills are improved to match the economic changes, which can also affect the business. Technological development demands that the employees acquire knowledge on new programs and courses that are introduced in the market. The Employee Training Programs will be developed so that the employee work performance is improved for maximum productivity of the company in the highly competitive computer training business market. The employees will also be able to offer new training courses to the clients in the most appropriate manner. Good training that will be offered to the clients will attract more clients. Furthermore, the high level of training that will be given to the employees will present the company as a service provider, which will be a good way of marketing itself.
A research team will be put in place so that monitoring of the programs and the courses offered by the company is done to establish which areas need changes to attract more clients. The success of the courses will be easily monitored, and errors that may occur during the training will be rectified as soon as possible. The team will also have a great responsibility in determining which changes have occurred in the business in order to recommend the development of new and effective programs or courses designed to address those changes. For instance, the mortgage crisis, which is expected to affect the IT demand due to economic slowdown, will require the company to develop courses that are most likely to solve problems that may occur from the crisis.
The company will need to develop a structure that will keep the cost of computer courses constantly affordable to the clients so that the number of clients will be increased. The company will be able to acquire more clients if it develops tailor-made computer courses for clients who may need them so that the computer skills provided during the training courses match the employer’s requirements. This will encourage new clients to enroll in the company’s courses based on the other companies’ improved performance that earlier trained with the company. The need to adapt computer programs to match economic changes will be a great motivation for individual and corporate clients to participate in the courses.
When will the unsettling economic conditions end?
A study that was carried out by economists at the University of California in Los Angeles in 2007 had predicted that the US economic recession would continue up to the beginning of 2008. However, the recession was predicted to end by the year 2009. Based on the business analyses that have been offered, the US unsettling economic condition is most likely to end by the beginning of the year 2009. Though the economy is experiencing some cases of recession, the economy is still strong enough to prevent a full-blown recession. Being the most powerful economy in the world, the US economy is expected to continue growing at a much higher rate than it is today.
Business economists are of the opinion that the economy’s recession will end in December 2008. The economy is now experiencing problems due to a slow down of the US economic growth as predicted to be experienced only in the first half of 2008 (www.chinadaily.com.cn/world/2008-02/25/content-6483170.htm.) This opinion has been supported by Ellen Hughes Cromwick, President of the NABE.
One way in which the economy is predicted to grow is through the moderate tightening of lending to consumers and businesses. This will provide businesses with capital so that the entrepreneur can promote economic growth while consumers spending will increase. By the end of the year, it is considered a possibility that credit market liquidity and functioning will be restored to normal. Though Gross Domestic Product is expected to grow at 0.4 percent at the beginning of the year 2008), the last quarter of the year is expected to record a 1 percent growth. This growth is anticipated due to the expected response of the economy to fiscal and monetary stimulus. For instance, the stimulus package that was signed into law in February 2008 is expected to boost economic growth. The tax breaks for the businesses and tax rebates, where individuals are to receive$600 while couples receive $31, 200 are a good motivation to economic growth. Furthermore, even though the stimulus may not completely end a recession, it will keep recession short and mild.
To strengthen our business position based on the business environment improvement, the company will be required to take certain measures. One of the ways in which the business position will be strengthened is by designing training courses that will be affordable to many clients who belong to the high, middle, or low-income earners. With the expected economic improvement over time, the company will increase the cost of the training courses to go hand in hand with the improved cost of living and economic growth.
Another measure that the company will be expected to take is to develop a marketing strategy that is flexible enough to accommodate consumer needs changes that are often experienced in any business environment. The marketing department will require developing marketing methods that will reach a large number of people while at the same time targeting particular clients for their specific courses. The strategy should be easily adjustable for the company to bring in necessary changes that will increase its revenue as the economy grows. Research-oriented management will be adopted so that market trends can be analyzed to establish the consumer needs that require to be provided for in the courses, who are the potential clients in the market and at which stage in time the courses will be most appropriate. The management will be able to make sound decisions on how to maximize the company’s profits based on research done in the business market. In order to out-compete other companies that provide similar computer training courses, the company will develop measures that will encourage upholding of business ethics, where the international business code of ethics will be integrated into the company’s management structure. High-quality learning and training will strengthen the company’s operations due to its good reputation and support from its clients.
What conclusions should we draw from today’s economic situation?
The United States economy though it’s the world’s most powerful economy, has been experiencing some problems. Concerns started to be raised by economists one year ago that the economy was heading towards a recession. For instance, the former US Federal Reserve Chairman, Alan Greenspan, raised concerns about the economy one year ago. He said that the US economy, which has shown signs of an economic cycle since it started expanding, would experience difficulties by the end of the year 2007. The US budget deficit in 2006, which fell to $247.7, supported Greenspan’s opinion (www.msnbc.msn.com/id/17343814/). The economic problems have resulted in the economy’s recession which has, in turn, slowed down business. The IT and computer sector has not been spared, though the impact it has on the sector depends on how the sector has developed strategies to counter it. The economy has been experiencing an increasing rate of unemployment which has reduced the purchasing power of the consumers. The jobs have been shrinking, which has been coupled with an imploding housing market. The cost of living has also gone up, making it difficult for middle and low-class income earners to afford what is necessary to earn a living appropriately. The corporate profits have not been spared, and they have been affected negatively by the weak labor market.
Global food and fuel prices have pushed the US inflation up, a situation that has made the US Federal Reserve cut down rates. The economic situation presents us with both opportunities and threats in business enterprises. The economy faces the threat of increasing fuel prices, as has been predicted. The oil prices have been increasing, and if the prices continue to go up, a high rate of inflation may occur in the US economy. Consequently, if the rate of inflation keeps on increasing, the US economy may be driven into a full-blown recession.
The consumers may be subjected to greater economic problems if the soaring fuel and food prices do not fall. High costs of fuel consumption in production have increased the cost of production for most companies. The companies may then try to cover up for the high costs of production by increasing the price of products, and the consumer will therefore be forced to carry the burden of the increasing global fuel and food shortages. This may limit the purchasing power of the consumers, which will lower the number of clients who will be enrolling in computer training courses. This may reduce the revenue generated by computer training companies in offering the courses to their clients.
The American dollar value and status have declined, which affects the economy negatively. A good number of Americans are now convinced that their economy is in recession or is under depression. In addition, they expect the economic condition to continue unless measures that will stimulate economic growth are put in place. Their opinion is based on the rate of employment and cost of living. Most of them cannot afford very costly computer training programs and courses. The company is faced with the threat of reduced returns due to a possible low number of clients since most citizens will lack the financial ability to pay for the courses. The value of the dollar needs to go up so as to boost economic growth. Failure to do so will expose the economy to more problems.
The households are faced with the future threat of low house prices and tighter credit conditions due to the sub-prime crisis. The households are denied an opportunity to borrow against capital gains to support their spending. This will decrease the revenue to the company because only a small number of clients will be willing to spend their money on the training (www.economist.com/opinion/displaystory.cfm?story_id=10134118).
However, apart from the threats that the economic conditions pose to the businesses, the condition has created great business opportunities in the IT and computer training sector. The economic situation has presented investment opportunities to individuals and private organizations, which have the responsibility of developing courses and programs that are meant to minimize the negative effects of the recession on businesses. The need for companies to seek fast and effective marketing strategies to cope with the tough economic situation has encouraged the development of IT and computer courses to satisfy their needs. This has created room for IT firms and companies to develop and sell their products to the global market. This has created a good avenue for increasing business revenue.
The increasing unemployment rate has promoted the creation of information technology courses that provide knowledge and skills to potential employees, based on what the employers are demanding. The need to build computer skills in companies and industries has encouraged organizations to enroll their employees in computer courses to improve their performance. In addition, the adoption of on-job training programs for the employees has been very instrumental in empowering IT firms’ employees to acquire knowledge and skills vital in improving their work performance.
Works cited
America’s Vulnerable Economy. The Economist. 2007. Web.
Dennis, Jacobe. Feb7, 2008. Forty-five percent see US in Recession or Depression. Web.
Greenspan Warns of Us Recession risk. Associated Press. Web.
McGee, Ken. 2008.IT and the Economy update: No IT Recession in US yet. Web.
US Economy to Skirt recession, but growth said to crawl. Web.
US to Experience near recession of economy: Study Last updated. Web.