Collins
by Mike Collins
January 10th, 2012

Good News for the Year Ahead

I wrote in January 2011 that it was easier to be an optimist at that time than a year earlier. This week’s positive economic news is helping make it easier to be optimistic about the year ahead. Employers brought on 200,000 employees in December. This hiring surge helped to lower the unemployment rate to 8.5 percent, the lowest rate seen since February 2009. Helping verify the positive trend, the unemployment rate has decreased in each of the last four months. According to the Department of Labor, more than 100,000 new jobs have been added to the economy in each of the last since months, a trend that has not occurred in over five years. It’s encouraging that the hiring was broad-based and not limited strictly to the retail sales industry. Manufacturing, health care, transportation and warehousing and even construction added significant jobs in December.

In 2010, 940,000 jobs were added to the economy and that number rose to 1.6 million jobs in 2011. The best news for the building products industry is that economists are predicting the addition of some 2.1 million jobs this year. Those additional jobs mean that there are 2.1 million more people that might consider home repairs, remodeling and purchases. More importantly, the other employees at all of those companies that are hiring are sent the signal that layoffs have ended and it’s not imprudent for them to think of remodeling and similar activities. Holiday retail sales showed that the U.S. consumer, the driver of the U.S. economy, has the will and the ability to go out and start spending again.

With the strengthening economy, many companies will begin to experience improving sales. With such an increase in sales, it is more important than ever to ensure that one’s bank is ready to serve as a strong partner in funding that growth. We are in touch with several companies that have begun to enjoy sales growth and have encountered an unexpected problem. Their existing banks, probably still gun shy from loan losses, are balking at increasing credit lines in order to fund that growth in sales. Lenders in certain banks are still under internal requirements not to lend any additional money to building products companies. Door and window manufacturers facing similar restrictions from their banks should take heart in the fact that other banks, viewing this as a turning point for the industry, are increasingly willing to entertain loans to building products companies. A careful and thorough search will likely uncover a lender willing to finance the growth that finally appears to be coming.

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