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The chatter around the state of the U.S. economy has been endless, with daily headlines warning of the inevitability of a recession. But upon closer examination, the economic data tells a much different story. Chief among these data points is the extremely strong job market. Companies are still hiring at a breakneck pace and unemployment is still the lowest it’s been in more than 50 years.1  So, what’s really going on? How should business leaders be thinking about the current state of the economy and, even more important, accurately anticipate what’s to come? What can companies do to be proactive, instead of reactive, when it comes to their business strategies? And where do we think things are really headed over the next year?

Doom and Gloom? Not So Much

Years ago, a Bloomberg TV anchor bestowed upon me the nickname, “the Duchess of Doom” for my constant raising of risks to global economic growth. Despite that lovely moniker, I currently have a much rosier outlook given what we are seeing in the data today. That’s because the economy is not directly represented by the stock market, thus, any stock market volatility only tells a portion of a story that is in fact much more positive. Just over half of Americans have money in the stock market, so what happens in those markets only affects half the country. On the other side, we recognize that the median household income in the U.S. was $70,784 in 2021 – which helps crystalize the fact that there are actually two economies to consider, and one of them is thriving.2

Why do these dual economies matter to business leaders? The health of the economy that is important for CEOs to hear is the health of the one that applies most closely to their particular consumer. Given that consumer spending is 70% of GDP, it is important that the drivers of consumer spending are positive, then the U.S. economy is propelled forward. Most critically, companies should focus on the “Walmart economy” as the health of their traditional consumer reflects that of the majority of the country. Currently, for the half of the country that lives paycheck to paycheck, that economy is still moving forward and spending with major purchases, including vacations, despite the consistent high level of inflation.3

The U.S. is also continuing to transition to our post-pandemic economy, which looks a lot like the pre-pandemic economy in its emphasis on services (goods naturally dominated at the height of the pandemic). There is a lot of concern over service inflation, but service inflation tends to moderate itself more so than goods inflation because it’s not dealing with things such as physical supply chains. It’s relatively easy to substitute one service experience for another, which might not always be true in the goods world. For example, consumers will simply not go to see Taylor Swift if it’s too expensive. However, they still will choose to go to another concert. That’s the whole point of the experience economy.

When you’re a mature economy like the U.S., you are, barring catastrophe, a service economy. Your demand is tied to your end consumer who benefits from your product. In these economies, goods are made to service other things (e.g., SaaS). The cost of physically producing goods in the U.S. is too high in most cases (except deliberate onshoring of certain necessities). It’s a CEO’s job to make things in the safest and most cost-efficient manner possible; it’s why we see GM producing cars in Canada and Mexico, in addition to Detroit. But the premium that makes the U.S. economy the most dynamic and consistent one is the innovation and entrepreneurship that are fostered here, and most of that is within the services arena.

The Changing Face of the Consumer

There is a lot of talk in the corporate world about diversity, but it’s important that the C-suite economically understand the diversity of who they’re selling to – business leaders need to be connected with a consumer enough to understand their behavior and their tradeoffs. For example, 75% of transactions are expected to be made by women by 2028 – as such, understanding how women buy is crucial.4  Hence, it’s not diversity just because it’s the right thing to do, but also because economically there is a positive ROI for businesses.

On a related note, we are seeing stratification generationally – another trend CEOs need to be focused on. For example, restaurant spending is up massively. Even before the pandemic, millennials were eating out frequently, with almost 50% of the millennial population spending more on dining out than they put toward retirement.5  For Gen Z, that trend is amplified. Grocery stores are already having problems with this and will need to adjust their mix and consider what needs to be done to get young people in the store (which often means store-within-a-store models and ready-to-eat foods at the deli as a larger focus of the business). It also means investment in technology, like scan-and-go, where customers scan their credit card on the way in and avoid checking out when departing the store.

As another example, since 2014, we’ve realized that the department store shopping experience does not appeal to all consumers. The consumers of the traditional, large, brick-and-mortar stores are boomers. Everyone else has mainly gone on to specialty retail (TJ Maxx, H&M, Levi’s) or the superstores (Walmart and Target).6  New generations are more targeted in their spending, thus the department store of the future will have a smaller footprint and a more accurate digital curation for their consumer.

Despite fears to the contrary, the economy is still going and growing – just in a back to the past way as the current economic data reflects 2019, pre-pandemic behavior. CEOs must be laser-focused on their end consumer (especially within a B2B enterprise environment) and what factors are affecting their buying decisions.

Focusing on the Right Data for Your Business

We accept that business leaders need information about their end consumers and where things are headed, but where do they get this information? Often, CEOs look to broad economic surveys like the University of Michigan’s Consumer Sentiment surveys or the Conference Board’s US Consumer Confidence Index. However, general surveys aren’t always very helpful when you’re trying to get a granular look at your end consumers’ actual behavior.

So, what are the right data points to look at, and how can companies use that information to plan? What sorts of indicators should they be looking at? For CEOs, it’s better to look at hard data. Jobless claims come out every Thursday. Mastercard data details actual (rather than intended) spending. These are just two examples of data we employ when measuring the health of the economy.

The U.S. economy has generally decoupled from the global economy through moves like energy independence and onshore manufacturing. The CHIPS Act and Inflation Reduction Act are pieces of legislation aligned with these advantages. That means we can continue economic boom cycles longer because we have fewer dependencies outside our control.

Employment keeps the economy moving since nearly 70% of our GDP is consumer spending. Debt has been rising, but we learned from the overleverage of 2009 as a society; people are no longer getting out over their skis on things like housing. In the post-pandemic real estate space, it’s much more likely for businesses to default on office buildings than consumers on their homes.7

When it comes to supply chains, I receive a report every week from China from a major shipping owner. What I get in this report is what’s on every ship and what they paid to charter. This report is a leading indicator of whether the supply chain is stuck, and if so, where, and why. From this report, you can derive which ships are moving, which economies are doing well, and which aren’t.

One of the defining characteristics of the U.S. economy is the tight labor market. In the last three years, we have finally put the labor supply wage increases where they needed to be. These wage increases came, for the most part, for the lower 50% of American earners. Business leaders need to understand that this new level is where pay will be and it’s not going back. Amazon is now starting employees at $19/hour plus benefits – that’s demand driving that price. It’s not just how tight the labor market is, but also what it takes to attract talent. Job seekers have the choice of going to online courses such as those offered by Google or two-year colleges to upskill and get a better-paying job.

Even with massive tech layoffs in the news, full employment is still essentially true as these businesses laid off significantly fewer workers than they had hired in the last few years. Moreover, those who got hit hardest by these layoffs are well-educated corporate employees; the majority of these workers have savings and 401(k)s and significant severance payments. If they want to go right back to work, they will be able to find jobs because there are still almost two job openings for every single job seeker.8

These labor stats have a demographic component. Currently, we have 1.7 children per household in the U.S. – but we need 2.3 to replace the working population that is retiring.9  There is an immediate mismatch that won’t change. This phenomenon is not unique to the U.S. (Japan, China and parts of Europe are also dealing with this same challenge). It’s another area where policy and business merge, as the U.S. needs to consider a revised immigration policy to have access to the population needed for our continued economic growth.

There is nothing wrong with the foundations of our banking system. We never want banking to be 1:1 in terms of leverage; the growth rate of our economy would go to zero. There is nothing wrong with volatile interest rates; they have been that way forever. What we do need is to apply better risk control and understanding so there isn’t a jolt that leaks into many more sectors.

A Banking Anecdote

When we think about the news about the state of the economy, it’s hard to escape the inevitable discussion on the banking sector given the events of early 2023. One of the worst phrases we’ve heard a lot lately is that banking is acting “different this time.” It’s never different. I’ve seen interest rates move up and down throughout my 35-year career, and they were moving well before my career started. This volatility is a function of a marketplace that works perfectly. It responds to information and moves one way or the other, just like it’s supposed to.

Having a leveraged book is the whole business of banking. Risk control of the lengthier duration assets is the most fundamental thing a bank must do. Banks need to be looking at where the deposit source is from. If deposits are from individuals, you’re in good shape! These individuals have a hugely diversified deposit base with less than $250,000 at each bank.

The banks that are having challenges are the ones that forgot to look at where their money was coming from, namely, businesses with large deposits. Any delta that quickly moves those deposits will put these banks at risk. Even for these asset managers, the important thing is the quality of the asset mix in which they invest. For example, Silicon Valley Bank (SVB) turned out to be sitting on quasi-guaranteed mortgages that were very long-term, and illiquid in a crisis moment.

When it comes to managing risk leaders must assess and run doomsday scenarios of the things that can go catastrophically wrong in their businesses. For banks, that scenario is obvious: What happens if there is a run on deposits?

This scenario planning shouldn’t only include black swan occurrences. It should also be industry and business-specific: What happens when interest rates go up? What happens if your largest customer leaves? Will the business be robust enough to handle it?

In a non-banking example, at the start of the pandemic, look how quickly the mom-and-pop cafes in New York were able to set up shop on the sidewalk when they couldn’t do indoor dining. It was a quick shift based on a worst-case scenario that few in their industry could have anticipated. Now, these sidewalk cafes remain a good source of revenue for these eateries.

VCs need to pressure test these companies. Could they live on half the cash if they needed to? Does everyone deserve to be there? Bigger companies all invest in smaller companies and, in times like this, the bigger ones must help in evaluating risk. Otherwise, it snowballs as we saw in the case of SVB.

In addition to more risk testing from VCs, we also must consider the role of regulation in banking and its impact on risk, especially how that risk can seep into other areas of the economy. Without regulation, we have anarchy. It’s always been a tug-of-war between regulation and free market economics; that’s a good thing. We don’t need a massive amount of new regulation because of what happened with SVB, but we do need to make sure current regulation is being enforced.

There is nothing wrong with the foundations of our banking system. We never want banking to be 1:1 in terms of leverage; the growth rate of our economy would go to zero. There is nothing wrong with volatile interest rates; they have been that way forever. What we do need is to apply better risk control and understanding so there isn’t a jolt that leaks into many more sectors.

The Right Data, More Proactivity

CEOs should lead their companies with more urgency with respect to strategy and innovation, not just during times of crisis. These leaders must look at data in real-time with their management teams rather than as part of the traditional but outdated “quarterly strategy review.” They need daily updates on critical metrics for trends they need to address more quickly – and reevaluate their assumptions almost daily. We’ve seen that capability play out in automotive manufacturing (the last place we expected to be able to move to just-in-time manufacturing) where leaders can leverage real-time data to make adjustments to their production schedules.

The more a CEO can convey that they are on top of things, the better. Shareholders don’t abandon ship for just anything, they abandon when they’re negatively surprised. I prefer when CEOs preannounce bad earnings, so shareholders won’t be surprised, thus controlling the narrative.

Good CEOs look at scenarios that are not in their purview. These leaders are trying to see how consumer habits have changed. They think about things that are beyond the daily remit of what they’re supposed to. They get out of their comfort zones, travel to communities globally and better understand cultural differences in the markets they are serving. This leads to them introducing different metrics that are globally, yet locally, applicable.

Reality is Better Than Expected

Rising interest rates. Inflation. Layoffs. The stories that have grabbed headlines as the post-pandemic economy has taken shape would lead anyone to panic.

Fortunately, there’s no need for that.

Business leaders will succeed by understanding the push and pull of intersecting aspects of the economy. By looking at the right data, understanding the end consumer, and recognizing where their businesses are heading in the next year or 20 years, they will stay on top of trends and mitigate potentially catastrophic risk.

Why is the stock market up or down today? It’s because it’s a market of expectations. Are the businesses we’re seeing sustainable? They are. Consumers are still spending, the service economy is booming, unemployment is extremely low. Things are, in short, better than the headlines would suggest. And things will continue to be good because, as stated, the U.S. is in a strong position to continue its boom cycle longer because of its self-sufficiency.

What does this mean for business leaders? From the café owners who turned the pandemic into a revenue-driving opportunity with sidewalk dining, to auto manufacturers who leverage data to move to just-in-time delivery, even a challenging economic environment presents opportunity. And the businesses that will win in the next decade will be the ones that know how to pull opportunity out of risk.


Sarah Quinlan is Consello’s Chief Economist.

She has over 25 years of macroeconomic asset management experience encompassing all asset classes.

She has also been an advisor to C-suite executives, boards of directors and government officials in over 50 countries.

At Consello, Sarah works across all the Firm’s businesses, applying her deep understanding of global market trends and the practical application of economic data, in order to advise Consello’s advisory and investing clients.

Prior to joining Consello, Sarah was the Managing Director and Founder of SAQ Economic Advisory LLC. Before SAQ, Sarah was Senior Vice President for Global Market Insights at Mastercard.

Before Mastercard, she was a Partner and Strategic Advisor at Matrix Advisors, working with corporations in industries ranging from insurance to glycol recycling.

She also previously held the role of CIO of a Family Office with $30 billion in AUM, driving strong returns across equities, bonds, commodities and alternative investments on behalf of her clients. Sarah began her career in Commercial Real Estate Investment Banking at Salomon Brothers.

Sarah holds a B.A. and M.B.A. from the University of Chicago.

The Consello Group is a financial services advisory and strategic investing platform. At Consello we invest capital to grow companies, and we execute for our banking clients across industries. We also offer business development services to help companies grow and a digital assets advisory business to help companies participate in the global digital financial services ecosystem. Consello offers these four distinct but integrated lines of businesses all on one platform: Investing, Digital Assets Advisory, Growth and Business Development, and Investment Banking and M&A Advisory.

The views and opinions expressed herein are solely those of the individual authors and do not necessarily represent those of The Consello Group. Consello is not responsible for and has not verified for accuracy any of the information contained herein. Any discussion of general market activity, industry or sector trends, or other broad-based economic, market, political or regulatory conditions should not be construed as research or advice and should not be relied upon. In addition, nothing in these materials constitutes a guarantee, projection or prediction of future events or results.