Weak economy? Which economy is weak?

Many people complain about the economy being weak, but have many stopped to think that certain segments were bound to become weak?  And if certain segments have become weak, might other segments have become strong?

Consider the booming sales of iPods, iPhones, smart phones, DSL subscriptions, wireless subscriptions, and on and on.  Airlines are making a mint on their extra fees – to some people's displeasure and to other people's pleasure.  Regional activities of all kinds are drawing people to the events and local merchants.

What has become weak is more of the same.  Cars are built to last longer and cars are built with less labor.  People are staying in their houses longer and not moving so frequently; that means less turnover and that means fewer home sales.

What has become weak is credit card purchases.  Not that people have stopped using credit cards, but many have stopped using their credit cards as indefinite loans.  In other words, more people have become "dead beats" – people who pay off their current balance every month.  That certainly cuts into the profits of credit card companies and banks and the sales of all kinds of businesses

Businesses are still being started.  Both the Duluth News Tribune and the Star Tribune feature new or growing businesses every week.  These owners have found products and services that people want to pay for.  In a world of iPods it will be difficult to sell lots of CDs.

We do have to recognize that life has become difficult for many people.  And business "efficiencies" and "no new taxes" governments are making matters worse.  If businesses and governments lay off employees, then there will be fewer consumers to buy goods and services.  If there are fewer consumers to buy goods and services, there will be fewer sales and taxes.  If there are fewer sales and taxes…

Netflix busts Blockbuster, or the Changing Economy

As part of my notion that we don't have a weak economy but a changing economy, I've been thinking about a blog entry about how Netflix is reducing the need for video stores and their employees. Today the Star Tribune had a story about Blockbuster – "Shares of Blockbuster tumble after warning it may need to file for bankruptcy protection". The article states that one of the causes is competition from Netflix. "The company has had to close about 1,300 stores and wants to shut down hundreds more." Shutting stores means letting employees go. Think of all the other video stores in the same predicament. Think of all the other businesses whose reason to be has changed.

All the employees let go by video stores won't be able to get jobs at Netflix or at any other similar service. Think of the idealized Netflix operation. A customer signs up online and is accepted or rejected automatically. A customer places an order online. The computer orders a robot in the warehouse to fetch the DVD, put it in an envelope, print the shipping address on the envelope, and place it in a bin to go to the Post Office. Now humans get involved with a postal employee picking up the bins and driving them to a sorting center. The sorting center is mostly automated and the sorted packages are delivered in another truck or series of trucks. A mail carrier picks up the packages at the destination post office and delivers them to the customers.

Even the postal workers will be cut out of this system. As internet bandwidth gets larger and more people have faster computers, the customers will order movies to be sent directly to their computers ("streaming").

This scenario is being replicated across industry after industry. People not needed. And guess who demands this: people who want lots of goods for the least money and hassle.

I'll stop here and get off my soapbox about the trends too many of us aren't considering.