The Coming Recession, Part 3 -- Just a Bad Cold, Not Pneumonia

Economists have suddenly changed their tune, following the Labor Department's announcement that job growth was much stronger last summer than the government had first anticipated.  It now appears that the clients of the legal profession will face a recession that is more like a bad cold, but not pneumonia.

  • The 1/2% rate cut in September by the Federal Reserve had a positive psychological impact on corporate America. This means business clients will be inclined to roll out new products, expand to new locations and engage in mergers and acquisitions.  [My own business has been thriving, and we just rolled out a new business development newsletter, Originate!]
  • It hasn't mattered that the price of oil peaked at $83.32 a barrel in September and will remain above $80.  "But the fallout often seemed negligible: Americans kept spending; employment kept growing; factories, construction crews and retail stores stayed busy," the New York Times reported on Oct. 5. Airlines, trucking companies and consumers were able to absorb the high cost.  [I still plan to buy a hybrid car, but now I'm not in a big rush.]
  • Consumer spending continues unabated -- this is the key element keeping the economy afloat.  Consumers have been using their credit cards more to finance purchases now that home equity lines of credit are becoming harder to get. Ryan Sweet, an economist at Moody's, said this is ''further evidence that consumers did not pack it in'' after the financial market turbulence hit in August. [My wife and I are "big spenders": we just went out to dinner twice recently, and splurged on a $10 Starbucks breakfast.]
  • The fall of the dollar compared to a Euro has a net-neutral effect.  A Euro now costs an all-time high of $1.41.   This means foreign travel and goods are more expensive for Americans, but it also means the products of US client companies become cheaper and more attractive.  [I'll just have to cut back on my Lindt chocolates and delay my trip to Prague.]
  • Clients and consumers are only mildly concerned by the Commerce Department report that the median price of a new home plunged in September by the largest amount in more than 35 years. Meanwhile home sales picked up, rising by 5.3 percent to a seasonally adjusted annual rate 1.075 million homes. It marked the second consecutive increase in sales following three months of declines.  [I have decided to wait on selling my house in Illinois until the housing market comes back to normal.]

Bottom line: there's lots of bad economic news, but it just doesn't matter.  Clients of law firms will apparently thrive and hire lawyers as much as they have all year.  It all goes back to my posts 2007 Looks Like an Excellent Year for Private Law Firms and More evidence that 2007 will be an Excellent Year for Law Firms.


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