Prepare for a Slow Recovery

Business owners and executives who are focused on accounts receivable management (ARM) and debt collection are anxiously awaiting the end of this recession.  ARM professionals know that the perfect storm of improved recoveries and high placement volumes occurs at the outset of any economic recovery.  

Improved results among many collection agencies and debt buyers in Q4 2009 and positive results so far in 2010 are leading some to believe the worst may be in our rear view mirrors and starting to fade.  Tax season will inevitably help improve confidence levels.

Not so fast.  

Last week, less than stellar results were announced in the two areas that most directly impact ARM results:  unemployment and consumer confidence.  New jobless claims filed during the week of February 15th actually rose by 22,000, exactly the opposite of what forecasters were expecting.  Consumer confidence levels fell sharply in February from January according to two prominent studies, hitting their lowest marks since the ’83 recession.  

At best, early signs of improvement are mixed.  Indeed, manufacturing and retail sales have shown the best results because of shifts in inventories and export growth.  Consumer spending has also increased, but you have to pull out auto sales to see positive results.  Wage and salary levels continue to tick upward and new jobless claims are down 70 percent from last year’s numbers. M&A is starting to pick up and the stock market recovered more than half of its losses, although it appears to have leveled off.  

Let’s stay focused on what’s most important to ARM and that’s job creation.  If the past is any indication, unemployment levels will remain high for months following the official end of this recession.  Most economists believe that unemployment levels will remain about where they are for the remainder of 2010 (currently 9.7 percent unemployment, 16.5 percent underemployment).  Each new person who loses his or her job is one more person who will struggle to pay bills.  And confidence levels are viral, spreading rapidly among friends and family of those impacted by job loss.  

We are not out of the woods yet and need to resist temptation to operate our businesses as if we were.  Cautious optimism should prevail and careful business planning now will pay off significantly when the economic tides really change for a sustained period of time.