Recent Recessions: Effects and Lessons Learned

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Recent Recessions: Effects and Lessons Learned
 
Companies must plan on how they will recover and grow during the next upturn.
 
By Hank Moore, Corporate Strategist
Perhaps because we had seen such a long period of prosperity, the current economic recession is causing inordinate panic. The media is helping this panic with headlines such as Economy Shrinks at Fastest Pace in 26 Years, Over One-Third of Americans Believe Nation in a Depression, and Wall Street Tumbles to Low Levels on Bank, Recession Fears.
Its important to read beyond the headlines and remember that recessions are actually a normal part of the business cycle. Recessions do have a valuable purpose in that they clear away weak companies and force people to spend less and save more. While this recession appears to be lasting longer than a normal recession, history has shown we eventually will emerge to a new period of economic growth, and the stock markets eventually will recover their losses and hit new highs.
Its easy to forget that we have had seven recessions since 1967. While this recession may seem different for various reasons, it is important to remember that recessions usually have different causes or related events new to our history. Here are some examples:
1973-1974 Stock Market Crash and 1973 Oil Crisis (1973-1975) lasting 2 years:
* In the 694 days between January 11, 1973, and December 6, 1974, the Dow Jones Industrial Average benchmark lost more than 45 percent of its value.
* The unemployment rate jumped from the 5 percent level to nearly the 9 percent in about a year-and-a-half.
* The Arab members of OPEC declared they would no longer ship oil to the United States and other countries if they supported Israel.
* In 1972, the price of crude oil was about $3 per barrel, and by the end of 1974 the price of oil had quadrupled to more than $12.
* In the United States, the retail price of a gallon of leaded regular gasoline rose from a national average of 39 cents in 1973 to 53 cents in 1974.
* The New York Stock Exchange shares lost $97 billion in value in six weeks.
* Inflation jumped from 3.4 percent in 1972 to 12.3 percent in 1974.
Early 1980s recession (1980-1982) lasting 2 years.
* The unemployment rate reached 10.8 percent.
* Bank failures reached a high of 42, and in the first half of 1983 an additional 27 banks failed.
* In 1984, the Continental Illinois National Bank and Trust Company, the nations seventh-largest bank failed. Members of Congress felt Continental Illinois was too big to fail. In May 1984, federal banking regulators were forced to offer a $4.5 billion rescue package to Continental Illinois.
* 415 savings and loan associations in the U.S. failed.
* In 1979, inflation reached 13.3 percent, and the Prime lending rate jumped to 21.5 percent by December 1980.
Early 1990s recession (1990-1991) lasting 1 year.
By 1989, more than half the Savings and Loan banks had failed, along with the FSLIC fund that was created to insure their deposits.
Early 2000s recession (2001-2003) lasting 2 years.
* By the end of 2001, the S&P 500 average price-to-earnings ratio was 46.50, well above the historical average of 15, and it was thought that earnings didnt matter in the valuation of stocks.
* The NASDAQ lost 78 percent of its value following the collapse of the dot-com bubble.
* From March 2000 to October 2002, technology companies lost $5 trillion in market value.
* After the September 11, 2001, terrorist attacks, the Dow Jones Industrial Average suffered its worst one-day point loss and biggest one-week losses in history up to that point.
* Unprecedented accounting scandals at companies such as Enron and Worldcom.
While no one knows for sure when this current recession will end, we do know that typically the stock markets recover before the technical end of a recession, and that on average, the stock market earns 38.6 percent in the 12 months following the trough, or bottom, of the market.
No two recessionary periods are exactly alike. Some were driven by equity market bubbles, significant corporate earnings deterioration, or to oil price shocks.
 Since the beginning and end of a recession cannot be accurately called until well after they occur, it is all the more difficult to predict how the markets will perform before, during, and after any subsequent recession.
 It is important to maintain a broad resource allocation plan to survive, and ultimately thrive, through a recession and post-recessionary market.
 Companies must plan on how they will recover and grow during the next upturn.
Great Business and Life Lessons Learned
* Acquire visionary perception.
* Never stop learning, growing, and doing. In short, never stop!
* Offer value-added service. Keep the focus on the customer.
* Lessons from one facet of life are applicable to others.
* Learn from failures, reframing them as opportunities.
* Learn to expect, predict, understand, and relish success.
* Contribute to the companys big picture and the bottom line…directly and indirectly.
* Prepare for unexpected turns. Benefit from them, rather than becoming a victim of them.
* Realize that there are no quick fixes for real problems.
* It is not WHEN you learn, but THAT you learn.
* The path of ones career has dynamic twists and turns…if a person is open to explore them.
* Learn to pace…and be in the chosen career for the long run.
* Behave as a gracious winner.
* Find a truthful blend of perception and reality…with sturdy emphasis upon substance, rather than style.
* Realize that, as the years go by, ones dues-paying accelerates, rather than decreases.
* Understand what youre good at. Be realistic about what youre best at. Concentrate on those areas where they intersect.
* Continue growing as a person and as a professional…and quest for more enlightenment.
* Be mentored by others. Act as a mentor to still others.
* One learns to become his/her own best role model.
* There is ALWAYS a next plateau, when we seek it.
A regular contributor to www.trainingmag.com,Hank Moore has advised 5,000-plus client organizations, including 100 of the Fortune 500, public sector agencies, small businesses and nonprofit organizations.  He advises companies about growth strategies, visioning, strategic planning, executive leadership development, Futurism, and Big Picture issues that profoundly affect the business climate.  He conducts company evaluations and performance reviews.  He creates the big ideas, mentors the board members, reorganizes the corporate culture and anchors the enterprise to its next tier.  The Business Tree is Moores trademarked approach (and the title of his current book published by Career Press) to growing, strengthening, and evolving business, while mastering chang