It is always reassuring to get official confirmation of the obvious. The National Bureau of Economic Research declared earlier this month that the United States has been in recession since December 2007.
In the first half of 2008, there weren't many economists who used the "R" word. The worst I heard any of them say was that our nation's rate of growth had slowed substantially. It wasn't until autumn that economists began speaking in overtly gloomy terms. And now, no one has to wonder anymore. Yes, we are in recession.
The academics can argue about when the recession set in but any business owner can tell you exactly when it started. A recession is when business falls to levels noticeably lower than the previous year. A recession is when business is so slow that it makes it impractical to consider raises for employees, let alone hiring new staff. A recession is when customers ask for a little more time to pay, and they buy less, and they decline to make commitments about future business.
As a bank owner, you've seen all this. You've experienced it first-hand, and you've talked to small business customers who are going through such scenarios. You see the real estate that is going unsold; you hear about the laborers losing their jobs, and you know when business at the steak house falls off.
Yogi Berra said you can see a lot just by watching and bankers will do best relying on their own first-hand observations. You are in your community more deeply than anyone. You know what's going on before any statistician or economist. Of course, seek outside counsel when you really need it, but for the essentials in running a bank, rely on your own experience, observations and instincts. Don't wait for someone else.
Next year will probably challenge all of us in business as much or more as any year in the last three decades. Now is the time to observe carefully. Don't ignore important clues. Listen to your customers, your employees and shareholders. They will give you more valuable information than any of the newspapers or TV stations. Make decisions based on firsthand observation. If your own observations are telling you one thing, while all the experts are telling you something else, go with your own observation. Nobody is more expert at running your bank than you.
ON A SEPARATE note, let me take this opportunity in the last issue of 2008 to thank all of you who have supported NorthWestern Financial Review during the last 12 months. The economy has given us a roller coaster ride that is likely to extend well into the next year. Let's enjoy the ride together. Best wishes for the remainder of the year and a prosperous 2009!
Copyright 2008 Northwestern Financial Review
