Inconsistency Continues to Color Economic Outlook - Modern Distribution Management

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Inconsistency Continues to Color Economic Outlook

Latest data show a disconnect in the health of the economy.

The U.S. unemployment rate continued its downward trajectory, as businesses added an estimated 225,000 jobs in July. That's the good news, as jobs were the missing factor for recovery a few years ago. But while jobs are growing, the U.S. gross domestic product continued its tepid slog, increasing only 1.2 percent in the second quarter, according to the "advance" estimate from the U.S. Bureau of Economic Analysis.

The disconnect between the data is palpable – but also demonstrative of the roller coaster we've been seeing over the last few years. One month some signs point up while others point down, and the next month they switch positions.

"The fact that employment growth remains robust even when GDP grows at a one percent rate is disconcerting, as it implies that labor productivity is continuing to weaken from already anemic rates," notes The Conference Board. "One potential explanation is that much of the weakness in GDP in recent quarters comes from manufacturing and mining, which are both capital intensive industries, so the impact on overall employment is limited."

This possibility is reflected in the employment situation numbers presented by the U.S. Bureau of Labor Statistics, which noted that manufacturing employment remained unchanged in July. Mining lost 6,000 jobs in July, bringing its total losses since September 2014 to 220,000.

It's disconcerting for many distributors. Economists keep forecasting a pickup in activity, yet 34 percent of respondents to the most recent MDM-Baird Distribution Survey noted they've seen an increase in summer shutdown activity this year.

And the outlook by some is for even more shutdowns to come. "If things don’t strengthen significantly, you’re going to see more companies close the whole week of Thanksgiving and after Christmas," one respondent noted.

If history is any indicator, activity will eventually stabilize. But until then, resist the urge to dig in and wait for it to happen. Create a strategic sales plan that includes knocking down silos between departments in your organization (read more about how to create a strategic sales force in ROI from CRM, available now from the MDM Store.)

Assess your talent needs for the future, rather than the past, and invest in creating a top-notch team. (Read more in 2016 Distribution Remodel: Deepen Talent Development.)

And make sure the foundation you're building your future organization upon is solid. (Read more in 2016 Distribution Remodel: Refocus on the Core.)

This slump will eventually pass, but what the market looks like on the other side may be very different than what you've become accustomed to. So embrace the wisdom of the Boy Scouts and be prepared.

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