Useful Capital Strategies Recap: The Economic Landscape for Growth in Texas

From the Houston TeXchange August 16th event recap:

Question: What is the economic landscape for growth?

It is forecast that in 2013, small businesses will represent the lowest percentage of the GDP at 55% since the great depression. 

Today, government, education, and law enforcement account for 5.5 out of every 10 jobs created in the economy (6 out of every 10 jobs by 2013).

• The IRS recent announcement to hire approximately 6,500 new agents into training to enforce Obama Care illustrates just a small example of this trend.
• The Labor CMS department hired 1800 inspectors for healthcare compliance to attack the offshoring of jobs.
• The majority of businesses started since 2007 will have failed (3 million businesses will fail in 2013 alone).

The reality for small business today is highlighted from the findings of a recent survey conducted on behalf of the National Federation of Small Business which found that in addition to the fact that growth for the first two quarters of 2012 was flat that:

• 84% responded that they had not hired or expect to hire until 2013 (and most new hires would be temporary or part-time).
• 89% responded that they will not increase Capex anytime soon (Capital expenditures, or Capex are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year).
• 91% responded that they expect no increase in sales and new customers, in the near-term.

Clearly the economy for the small business sector slowed in the 1^st half of the year. Job growth fell far short of expectations, with inventory and Capex levels reverting back to the Q3 2009 all time lows. Political uncertainty and the effects of the social engineering efforts of the past 4 years have clearly taken its toll.

Here in Texas we reflect in a more precise manner what our country has experienced over the past 50 years and will be experiencing in our current new economy including the significant redistribution of wealth that has and will continue to occur at least in the near-term.

From the 1950’s thru the 1990’s we were a resource driven economy in Texas like the rest of the entire country. As in this case of Texas as oil and gas went so went the Houston economy and it wasn’t until the 1990’s that we started to diversify. At that time we started to take boom or bust out of the economy by diversifying into information technology, service industries, and healthcare sectors.

The facts are that personal household wealth increased 2x from 1948 thru 1988 and then 2x again from 1988 to 2008. Now that has all changed.

Now we have an economy that has changed from resource driven to information driven.

 

The truth is in Texas we are a society of migrants and immigration heritage and we must prepare our businesses to migrate and adjust to change.

• In 2014 we will have more Hispanics then there are Angelo’s (40% will be Hispanic and 36% Angelo).
• Other diversified nationalities represent nearly 25 of our workers and consumers (Chinese and Indian being the largest).
• Couple that with nearly 76m baby boomers nationwide rolling thru the economy of which of our 27m in Texas people nearly 5m are baby boomers.

 

Download the full Houston TeXchange recap on Useful Capital Strategies for Growth here:

http://www.ephorgroup.com/download/UsefulCapitalStrategiesforGrowth-August2012.pdf

Comments

[MarketingEvolve]

Any thoughts on Q4 of THIS year? We're thinking cloudy with a chance of spending: http://jdm-digital.com/2012/09/q4-forecast-spending/

[charles bedard]

Emerging growth and branded leaders in each industry sector will be spending. Everyone else will take a "wait and see" and be very tight with budgets. Focus on growth companies and leaders. By 2014, there will only be bigs and smalls. The mediocre companies will be filtered out by the economy.