HC Global

Morning

What's 'LUV' got to do with it?

Now that we finally have consensus over the fact that the UK is in recession (the R-word), and has been since June, the big question is what about 'LUV'?

For those of you not familiar with 'LUV' it is to do with the question of what type of recession are we in for?

As little as a few weeks ago a number of commentators and the government were insisting that is was V-shaped, i.e. a sharp slowdown and then a return to previous highs in 2009.

A number of commentators including myself suggested that it was more U-shaped i.e. a sharp slowdown followed by a longer period of retrenchment followed by a new growth scenario happening in 2010/11 onwards.

Then there's the L-shaped - the one everybody dreads with the D-word, Depression. This one is a sharp slowdown followed by a protracted no-growth period (hence the L) before some upturn similar to that experienced in the 1930s.

Our current probability forecast:

V-shaped: almost zero and reducing

U-shaped: 65%

L-shaped: 35% and growing

The further question is when does a  'U' resemble more an 'L'?  i.e. at what point is the small growth line of a U have more in common with an L? (Still following?)

This is of course the big question right now which is why some people are genuinely scared. (By the way, the last time that UK/Europe,the US and Japan were in recession together, as they are currently, was 1945.) 

Of course all this is at the collective 'macroeconomic' level and in reality it is more appropriate to view certain industries at global and local levels.

Whatever the shape we know that when we emerge at the other end the car and retail industries will be transformed (i.e. smaller). Investment banking has already undergone transformation. Hedge funds and private equity are entering theirs as is real estate. Airlines are about to. Telecoms. Pharma. Engineering/manufacturing and the public sector (excluding NHS) and so on.......

ZIRP  

A new (acronym) word meaning Zero Interest Rate Policy. Yes collectively we are approaching it like the Japanese economy did in the last two decades. The problem is it doesn't necessarily work. When ZIRP or near-ZIRP appears it usually signifies a potential deflationary period. i.e. a period of price deflation (going down) which affects everybody. The appearance of ZIRP is not good...

HR's focus

News already that HR jobs being cut left, right and centre seems to be a foretaste of more to come as earlier predicted.  

Well at the risk of repeating myself over and over and over again, HR's focus should be on

1. Employee engagement and productivity
2. People management effectiveness
3. HR function/people mangement cost effectiveness

All these having an underlying theme of 'managing in a downturn'.

Everything else is irrelevant.

We expect VaLUENTiS HR Function 2.0 solution suite will be in special demand from here-on in as it focuses on these three aspects within the underlying theme. We'll see......

Next week I look back at 2008 and see how my forecasts panned out and provide a forecast as to what 2009 will look like..........