According to most experts and economists, including Federal Reserve Chairman Alan Greenspan, the U.S. economy is on the rebound after one of the mildest recessions on record. Unlike other economic downturns, this time consumer spending remained fairly strong while the manufacturing sector got hammered. The good news is that the manufacturing activity rose in February for the first time since July 2000.
While economists may have characterized the recession as mild, many pallet professionals held a different opinion. Our staff occupies a unique perch because we work with pallet people on all fronts. Pallet manufacturers, recyclers, and equipment suppliers are all singing a more enthusiastic tune than they were just a month ago.
Wooden pallets are unique products that interact with virtually every segment of our economy, including manufacturing, sales, warehousing, and materials handling. Because a pallet is so simple, the demand for pallets often suffers more than some products. It is relatively easy to give a worker a hammer and point him toward the pallet boneyard in a remote corner. Thus, some damaged pallets are brought back to life, and pallets are scavenged from around the plant when people have time to do some cleanup work. In addition, companies work down inventories during slower economic times, which frees up pallets that had been under loads. More pallet users are willing to look at recycling options when management is screaming loudly about cutting costs. Thus, the demand for wooden pallets may suffer more than the overall economy during a recession. So, when business improves, the pallet industry often finds itself scrambling to take care of the actual growth in manufacturing shipments as well as some additional growth related to inventory building.
Obviously all of us are anxious to see things get better. Pallet people were holding their breath when the recession hit because they feared the worst. We were braced for a major industry washout, but we have heard of very few established pallet companies going out of business. Many have complained about business levels and the lack of profitability, but they are still here.
But what does the future hold? The economy has changed so dramatically that manufacturing activity no longer carries as much weight as it once did. Thus, many people were still standing in the wings saying we were not in a recession when manufacturing jobs were decreasing significantly, and a growing number of industries and plants were moving out of the country, many of them off shore to the Pacific Rim.
Most economists believe the United States is on a long road to economic recovery. It looks like this recession could be the first ever without two straight quarters of shrinking GDP. The recession has been shorter than most experts predicted. Yet, the upturn may take longer than most due to already high consumer spending levels and a still fairly weak industrial market sector.
The unemployment rate fell slightly in February for a second straight month. Orders for long-lasting durable goods rose 2.6% in January, which is much higher than expected. Construction spending also climbed.
The threat of inflation continues to be very low, so the central bank will probably be able to leave rates alone for a while to ensure the recovery gets under way. We are leaving behind the 10th recession since the Great Depression. Many recessions have a double dip, but many economists say that neither a double dip nor a boom seems likely this time. If the consumer spending stays strong while the manufacturing sector continues to grow, the economy should not dip back into a recession. Maybe we would all be better off if a gradual recovery takes place.
During the 1990s, some in the industry feared that the next recession would drive many pallet companies out of business. I am happy to see that most of my pallet friends have been able to weather the storm. Let’s hear it for the resilient small business entrepreneur in North America!
