Using Contractors During an Economic Recovery

The press has recently reported the first real indications that economic conditions may be improving and the end to this recession may arrive more quickly than expected. Following the horrific events of September 11th and the resulting acceleration of an already soft economy, this news is certainly welcome to all in the business community.

Recovery?
It now appears that growth in the first quarter of 2002 is a reasonable likelihood, with most experts estimating annual growth at 3.5%-4% by the end of the year. Mark Zandi, chief economist at Economy.com said "the consensus has been that the recession will be over early next year, sometime in February, March or April". Also, in early December James Glassman, senior U.S. economist at J.P. Morgan Chase said "Everybody believes the economy will be turning in the next three or four months".

Three major economic signs seem to point to a quick recovery in 2002. The first is the news on state unemployment claims. As traditional wisdom is that unemployment rates continue to rise even during the first stages of a recovery, experts have been expecting the rate of weekly unemployment claims to continue rising in the near future. However, the Labor Department has reported that initial claims for unemployment dropped in early December and by late December were increasing at a slower rate than expected. This bodes well for a recovery.

Second, the stock market historically bottoms-out about 6 months before a recovery. Over the past couple of months and since bottoming out in late September, both the Dow Jones Industrial Average and the Nasdaq have rallied and shown encouraging signs. Third, consumer confidence has a tremendous impact on our economy. Shortly after the September 11th attacks, confidence dropped significantly. Among executives of New England technical firms, 33% indicated that they were "not confident" in business prospects in their industry immediately following the attacks. In recent weeks, data seem to indicate that consumer confidence and general attitude towards the economy are rebounding. This should lead to increased consumer spending by the second quarter.

Certainly not all of the economic news is good; however, the "mixed signals" we are currently seeing are often typical of a period of transition.

Why Contractors?
Over the past several months, many companies have adopted a ‘wait and see’ attitude towards the economy while minimizing costs and delaying projects. And, even with mildly encouraging news on the economic front, companies remain uncertain about prospects for the near term and may be very cautious about allocating resources until a recovery is certain.

Still, projects need to be accomplished: inventories must be replenished and research and development must continue to ensure business competitiveness for the future. Technical contractors are an ideal resource during these times. Contractors provide companies enormous flexibility to quickly add technically skilled professionals to accomplish important functions within the organization. If business does not pick up as quickly as anticipated or slows again sometime in the future, contracts can be immediately terminated without any human resources or payroll complications. This is important as, according to economists at Credit Suisse First Boston, "the risk is that the pace of economic growth could be very uneven through much of next year (2002). It might not be a smooth transition from recession to expansion".

The bottom line is that technical contractors will be there when they are needed and only for as long as they are needed. Technical contractors are a logical means to maintaining, and even growing, business operations in an uncertain time.

Triad Engineering Corp has specialized for over 32 years in helping clients fill their technical staffing needs on a contract and contract-to-direct basis. Triad is locally owned and operated and offers the most personalized service and experienced staff available. Please contact us at 800-649-1514 or visit our web site www.triad-eng.com for more information.