In a recent interview on the region’s economic outlook, Columbia Bank President Melanie Dressel was asked what it might take to get businesses confident enough to resume investing.
Her answer: “Two consecutive days of good economic news.”
She wasn’t being facetious. Dressel hit upon a factor that is crucial in creating, accelerating and braking economic momentum: Confidence.
It’s not a simple matter of not having enough of it, and trying to manufacture some if you don’t. Too much confidence, or misplaced and unjustified confidence, can be more perilous to an economy than a deficit of the stuff. The Great Recession was the result of too much confidence about home prices, employment, interest rates and debt levels.
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If we’re lacking in confidence these days, from our own family budgets to global macroeconomics, we’ve got good reason. Foreclosures, job losses, business failures, swooning stock and home prices and nations teetering on default have a way of doing that.
What do we have to be confident about these days? And should we be trying to accentuate the positive and eliminating the negative?
Believe it or not, there are some scattered hints of clearing. If you’re Boeing or a one of its suppliers or subcontractors, facing production increases and a backlog of orders, the looming question is whether you can handle such prosperity. The state’s Economic and Revenue Council, in predicting Washington’s economy will outperform the rest of the nation in 2012, cites growth in the farm and export sectors, as well as hiring by Boeing and Microsoft.
The recent Boeing-IAM agreement to keep 737 production in Renton, the council says, “will immediately boost businesses and consumer confidence.”
There’s that word again.
Dressel says that most businesses she talks to are doing well and are feeling good about their prospects. But is that enough confidence to translate into expansion, investment and job creation?
For some businesses (see aerospace, above), yes it is. For many others, there’s still hesitancy about the strength and durability of the recovery.
“For a lot of business owners, as they’re trying to get over one shocking event, one seems to follow every three to six months,” says Andy McDonald, Columbia’s executive vice president and chief credit officer. “It just seems like there’s one blow after the other.
A prolonged period of no blows is what it’s going to take to get most people to start feeling a lot better about investing in more capital projects.”
Yesterday it was the threatened shutdown of the federal government over raising the debt ceiling. The day before that it was Greece. Tomorrow it might be more bad news about housing, another trade spat with China, a plant closing in Washington (such as the 850 jobs that will be lost in Everett with Kimberly-Clark shutting a pulp and tissue mill there), a spike in oil prices, or Greece again, along with the rest of Europe. Those who believe you can talk yourself into a recession will say you get the economy you expect, and too much caution and waiting will perpetuate sluggish conditions. They also argue that bad news doesn’t stop coming even in relative good times.
They have a point – sort of, not that it matters much to those who have to make the decisions about spending and investing, and who have to live with the consequences.
Prudent consumers and business owners don’t need to be told it’s now all rainbows and unicorns to take some economy-growing risks. But they have enough recent, vivid, painful and personal experience with an abundance of bad news that they’ll need at least two consecutive days – or more – to have confidence that more glum news isn’t coming with the same frequency and intensity.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at email@example.com.