PSA-TEC attendees told rough times may end soon

Sunday, June 1, 2008

ST. CHARLES, Ill.--As part of a larger day-long program on working with the U.S. government, attendees here at PSA-TEC heard on May 6 from U.S. Bancorp economist John Mitchell that the current economic downturn may be short-lived. Or it may not.

Though the Federal Reserve is projecting economic growth in the second half of this year, Mitchell said the economic indicators are mixed on whether the country is currently in a recession, and the way that some of those indicators turn in the next six months will likely determine how bad an economic situation we might experience.

He noted that the factors pointing to a slow growth, rather than a recession--namely a continuing growth in the GDP (even if it’s small), the fact that jobless claims have stayed under 400,000, and that industrial production has remained up--are generally outweighed by recession-looking stats like an unemployment rate that’s jumped over five percent, the housing decline, consumer confidence being at a 26-year low, and weak retail numbers.

Mitchell noted three bellwethers that integrators and installers should be monitoring in their areas of the country, as the economic climate will likely vary by geographic location.

First, there is the question of when the housing problem ends. Not only do new homeowners represent new sales for integrators and installers, but state and local governments are affected by price drops and vacant properties when the taxes don’t flow in, and this affects their ability to invest in security. If losses in home equity continue in Las Vegas, Miami, and San Diego, for example, the effect could be large.

Second, what are the implications of the credit crunch? Are there more hard times to be felt in the credit industry? For example, if municipal bonds were to quickly be devalued, that would affect government’s ability to spend on large projects, like new construction and security.

Finally, will the current fiscal policy work? Basically, will the stimulus package, the money being sent out these past couple of weeks by the federal government, actually be spent on things that will get the economy moving again? This is tied directly to whether consumers can shrug off the big price increases in staples like gas, flour, rice, and foodstuffs in general. If this causes people to start increasing their savings, it’s unlikely people are going to be investing in new security systems (though maybe they’ll value security higher, feeling like they have more to protect).

So, what’s the good news Mitchell had to offer?

For one thing, he said, health care spending ought to be “bullet-proof” going forward, as Baby Boomers retire and need more services, and education should be a robust vertical. Retail, especially, could see hard times in the short term, he predicted.

In his summary conclusions, Mitchell predicted government spending on security would continue unabated, and that the security industry may not feel many of the effects of this potential recession, but that integrators with too much commitment to the commercial construction market may feel a pinch.

PSA-TEC is run by PSA Security for its members. Content included vendor training, an exhibit show floor, an award show, and a number of networking events.