How’s your confidence?

Business always has its up and downs. We’ve all been through more than a few. As au courant as the dot-com economy might seem, that bubble floated skyward decades ago, bursting in 2002. It wasn’t just a small dip. Between 1995 and its peak in March 2000, the tech stock-heavy Nasdaq index rose by 800%, only to fall by 78% from its composite total by October 2022. Many companies that were household names disappeared. The dot-com bust was further compounded by the 9/11 attacks.

Then, in late 2007, the subprime mortgage crisis collapsed the U.S. housing market, resulting in the Great Recession. Falling real estate asset values contributed to a global financial crisis. Strong fiscal stimulus was required. Industry bailouts, near-zero interest rates and government spending reached unprecedented levels. As a result, the economy was restored to a growth trajectory for the next decade.

In March 2020 came the COVID-19 pandemic and more unprecedented fiscal stimulus. Borrowers are likely to be more comfortable than lenders with near-zero interest rates, but most everyone should be at least a little nervous about industry bailouts and deficit spending.

On the other hand, what were the alternatives? Let’s face it, business failures and massive unemployment just aren’t that attractive. While recessionary data points are unquestionably a bit dark, equally important are what happens leading up to and in between recessions.

Prior to the dot-com bust, the 1990s were the longest growth period in U.S. history. After Sept. 11, 2001, the economy expanded for more than six years, and following the subprime mortgage crisis, our economy expanded for 10 more years. After the steep declines of the pandemic through early 2021, growth returned on an unprecedented basis, with the U.S. leading the world economy.

Macroeconomics are important, but U.S. and global metrics don’t necessarily tell the story of an individual local business. Beyond the data, anecdotal information is important. Consumer sentiment and business confidence do more to drive politics and market prices than any objective set of economic facts.

During the second half of last year, I had many conversations with business leaders and salespeople who expressed worries about inflation, recession and declining consumer confidence in 2024. So far, those concerns appear to have been unfounded.

U.S. gross domestic product increased at significantly higher rates during the last half of 2023, increasing at a 3.3% annualized rate in the fourth quarter. Inflation concerns heated up last summer but cooled by year-end. In January, the U.S. consumer price index stood at 3.1%, higher than the Federal Reserve’s inflation target of 2% but a step down from January 2023’s 3.4% rate and way down from 7% in January 2021.

Meanwhile, the U.S. unemployment rate is currently 3.7%, well below the long-term average of 5.7% since 1948, and Virginia’s unemployment rate is 3%. The commonwealth’s long-term average of 4.57% is a full point below the national average.

Fortunately, as if all our children are smarter, taller and maybe just a little closer to the perennially open spending spigots of Dee Cee, Virginia always trends toward above-average numbers.

While I always would personally rather give peace a chance, it doesn’t hurt the commonwealth’s economy to have two hot wars in Ukraine and Gaza calling upon the military-technology complex of Northern Virginia and Hampton Roads to supply their needs.

So, how’s your confidence? I’m admittedly a glass-half-full kind of guy, and expecting the worst rarely leads to the best. Rather than anticipating recessions, let’s look at the time periods between them. Based on that analysis, we are still in the early years of what should be a significant period of growth and expansion.

Let the good times roll.