Newfound Optimism

Holy jobs report!

Not only did the U.S. economy generate 236,000 new jobs in February, sectors such as construction have found new found strength.  While many sectors have already recovered, construction (which added 48,000 jobs last month) and real estate have lagged behind[i]. The real estate shadow economy, driven by new home sales (or lack thereof) has been a drain on the broader based economy.

While one job report does not an economy make, other indicators provide some room for optimism.  The February Consumer Confidence Index (as published by The Conference Board) is at 70, up sharply from 58 in January.[ii] The most recent confidence survey conducted by Vistage and The Wall Street Journal found that 69% of CEOs (of small companies) believed revenues would increase in 2013. As of this writing, the Dow Jones Industrial Index is at an all time high.

While black and white economic trends may provide the greatest relief to our psyche, the confidence of investors to invest and consumers to spend is perhaps the most important variable as predictors of growth. The mood of the nation is the impetus to investment and spending. Our confidence is higher, even though consumers are facing relatively high fuel and food costs.

The Fed has indicated it will not raise rates as long as unemployment remains above 6.5%.  We may be in a unique window, where the economy is growing fast enough to induce confidence, investment and growth, but not heating up too fast to generate inflation. Any study of economic cycles tells that these conditions won’t last forever.

The most nimble of entrepreneurs know that leadership teams need to plan for the things they can control so they can react to the things that they cannot. Near term market conditions seem to be better than they have been in years, and entrepreneurial companies have the opportunity to lever their nimbleness for competitive advantage.

So it may be the time to consider investments that will position for growth. Some, bitten by the last recession will be less aggressive than they have been in the past. Many competitors are weakened. The strong will get stronger.

Sectors such as automotive, technology and health care are expected to lead the way. The uptick of U.S. manufacturing and technology are especially encouraging, as manufacturing has historically provided a base for jobs, and technology a springboard for innovation.  2013 could prove to be a better year than many expected.

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