Uncertainty Makes a Comeback

By Andrew Paparozzi
In June 10, 2011

After the November 2010 elections and the tax compromise on maintaining the Bush tax cuts through 2012, the clouds of uncertainty hovering over the U.S. economy seemed to be lifting. As a result, and bolstered by improvement in the monthly data, a more positive view of the economy emerged—economic forecasts generally were being revised upward. That’s all changed. The data have weakened and uncertainty is once again restraining economic activity. Workers are feeling less secure; businesses are not sure where the economy and issues such as taxation, regulation, and health care are headed; governments continue to wrangle over fiscal conditions; and no one knows when housing is going to bottom. Although the Presidential election is 17 months away, for all intents and purposes the campaign has begun. The ensuing rhetoric will not diminish uncertainty. To the contrary, with the actual election so far away, it will likely add to it. 

A diminishing sense of clarity, whether real or imagined, will act to restrain economic activity. Businesses and consumers are going to hesitate on making decisions, especially big decisions—conditions not exactly conducive to a robust economy. That was highlighted by the latest report on employment. No matter how you slice the data, the report was weak. And we’ll need a robust economy to make a significant dent in the unemployment rate. A case in point: Productivity rose 1.8% in the first quarter; the same as the increase recorded by GDP. As we’ve seen in subsequent months, you’re not going to get much net job creation as long as increases in output can essentially be met by gains in productivity. And you’re not going to get significant gains in demand as long as hiring is restrained and cost pressures remain. How do we proceed in such a tenuous environment? 

For starters, there’s little we can do about the uncertainty regarding the overall business environment. It is what it is. We have to ask ourselves, Do we wait until the situation clears? We could, but be aware that’s not going to happen overnight. A follow-up question: Do we even have the luxery of waiting? In a rapidly changing industry such as print, the answer is probably not. Another option: we can try to establish our own space of relative certainty (remember, there is no absolute certainty). To do so, we need to answer and act upon questions such as: Where are we headed? Where do we want to go? What do we need to do to get on the right track? A robust economy does not appear in the making and uncertainty is unlikely to diminish anytime soon. Although the margins for error are diminishing, this is not a time for inaction. And going forward, flexibility is looking more important than ever. For some guidance on dealing with uncertainty and inserting organizational flexibility see the NAPL Capital Investment Study and the NAPL State of the Industry Report, Ninth Edition.

Andrew Paparozzi                Joseph Vincenzino

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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