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Economic recovery is still a long way!

Fri, 06 Nov 2009 18:35:53 +0000

So it’s official now that the economy is yet to recover. As many economists were speculating that the unemployment rate will be around 9.9 percent for October 2009, the Bureau of Labor Statistics(BLS) today confirmed that it was a double-digit 10.2 percent, the highest since April 1983. Earlier this week, the market was beaming with the news that the economy has grown at an annual rate of 3.5 percent in the third quarter after declining for past several months. The rosy picture was also painted by the Institute for Supply Management reports, claiming that economic activity expanded for both manufacturing and also non-manufacturing sectors in October.

So now we have a positive GDP growth and high unemployment. The GDP growth was probably fueled by “cash for clunkers” and better trade situation. Since retail sales (excluding motor vehicles and parts dealers) was around $250 billion in September, the picture changes if we consider sales for motor vehicles and parts dealers, which spiked in July. So, this GDP growth is probably a one-time phenomenon and not going to prevail. In order to have a sustain growth, consumer spending should rise. With the holiday season round the corner, but with so high unemployment situation, the sales is not going to get a boost in this season. Rise in consumer sentiments and more job creations are important right now. It seems that it will be a while before we see any of these improving.

Recession and Presenteeism

Thu, 29 Oct 2009 20:40:22 +0000

Recent news affirmed that although there has been a positive GDP growth in third quarter of 2009, it is still a long way before the high unemployment rates start falling. There has been no doubt that recession is hitting hard businesses. As employers are weighing options of possible layoffs, workers are skirmishing to keep their jobs. It is not difficult to understand that employees are more stressed today than they were couple of years back. Just to keep themselves employed, many sick employees show up for work these days. What they bring in with them is “presenteeism”. “Presenteeism” is a term used to describe a situation when a worker can’t work at his/her potential due to illness. Suppose an employee suffering from cold shows up for work, then his/her performance may suffer. Productivity loss due to presenteeism is immense.

As businesses are more concerned about ways to cut cost at present, they are neglecting the amount of lost productivity as a result of sick workers showing up for work. Previous studies have found that presenteeism sometimes cost businesses 7-15 times more than that due to lost workdays. For example, a study by Goetzel et al. in Journal of Occupational and Environmental Medicine estimates average cost per employee from lost workdays for Asthma in 2004 was $2.1 whereas it was $72.2 due to presenteeism. The same study estimated that cost associated with employee’s emotional disturbances was $33.4 in terms of lost workdays and $246 in terms of presenteeism. A 2007 study by Milken Institute estimated that productivity loss from lost workdays and presenteeism for workers and caregivers for seven major chronic diseases amounted to a staggering over $1 trillion to U.S. businesses. A big chunk of this came from cost due to presenteeism. Assuming the current recession will result in more presenteeism, the amount will be staggering in near future.

The bottomline is that businesses are so much concerned about their survival in this current recession so that they are neglecting the productivity losses which can be averted. These businesses will suffer long-term consequences if they do not take care of their employees now.

President Obama’s Tobacco Regulation Bill

Tue, 30 Jun 2009 18:37:30 +0000

On June 22, 2009, President Obama signed the tobacco regulation bill into law which gave unprecedented authority to the Food and Drug Administration to regulate tobacco products. Previous administration has not passed this bill as law. The bill aims to limit initiation of smoking especially for below 18 age-groups. It specifically mentions that “companies no longer can sell products with sweet, fruity, spicy characterizing flavors. There can be no products labeled “light” or “low-tar”. Moreover, warning labels must cover half of each cigarette package.”

The law is definitely a positive step towards the long battle to end smoking addiction. Media plays an important role on smoking initiation among youth. According to the Centers for Disease Control and Prevention (CDC), “Cigarette advertising and promotion, smoking by adults and older siblings, access to cigarettes, price of cigarettes, peer pressure and the degree of exposure to effective counter-advertising and school-based prevention can influence patterns of initiation.” http://www.cdc.gov/mmwr/preview/mmwrhtml/00052816.htm

It would take some time before any positive impact is visible. On the other hand, the tobacco industry might not take this law very nicely. In previous instances, the tobacco industry has claimed that advertising only influences brand preference and there is no link between advertising and smoking initiation. Although the growth was lagging in recent times, Cigarette and Tobacco industry is still a massive industry. IBISWorld reported that Cigarette and Tobacco Product Manufacturing Industry’s revenue was a staggering $42.9 billion in 2008. http://www.ibisworld.com/industry/retail.aspx?indid=293&chid=1

This law may affect the major players in the industry such as Altria Group, Inc., Reynolds American, Inc. and Lorillard, Inc.