The Daily Herald from Arlington Heights, Illinois • Page 26

PAGE 2 SECTIONS DAILY HKRALD I 1 THURSDAY, OCTOBER 22, 2009 may be time to give your accountant a listen ASSOCIATED I'RUSS Job seekers join a line of liundreds of peopie at a job fair sponsored by IVIonster.com in New eariier this year. Higher jobless rates could be new normal BY TOM RAUN Associated Press WASHINGTON Even with an economic revival, many U.S. jobs lost during the recession may be gone forever and a weak employment market could linger for years. That could add up to a "new normal" of higher joblessness and lower standards of living for many Americans, some economists are suggesting. The words "it's different tliis time" are always suspect.

But economists and policy makers say the job-creating dynamics of previous recoveries can't be counted on now. Here's why: The auto and constcuc- tion industries helped lead the nation out of past recessions. But the carnage among Detroit's automakers and tlie surplus of new and foreclosed homes and empty commercial properties make it unlikely these two industries wiU be engines of growth anytime soon. The job market is caught in a vicious circle: Without more jobs, U.S. consumers will have a hard time increasing their spending; but widiout that spending, businesses might see little reason to start hiiing.

Many smaO and mid-size businesses are still struggling to obtain bank loans, impeding their expansion plans and constraining overall economic growtli, Higher-income households are spending less because of big losses on their homes, retirement plans and other invesUnents. Lower- income households are cutting back because they can't borrow like they once did. That the recovery in jobs wiE be long and drawn out is something on which economists and policy makers can basically agree, even as their proposals for remedies vary widely. Retrenching businesses will be slow in hiring back or replacing workers they laid off. Many of the 7.2 million jobs the economy has shed since tlie recession began in December 2007 may never come back.

"This Great Recession is an inflection point for the economy in many respects. I think the unemployment rate will be permanently higher, or at least higher for tlie foreseeable future," said Mark Zandi, chief economist and co-founder of Moody's Economy.com. "Tlie collective psyche has changed as a result of what we've been tlirough. And we're going to be different as a result," said Zandi, who formerly advised Sen. John McCain, and now is consulted by Democrats in the administration and in Congress, Even before tlie recession, many jobs had vanished or been shipped overseas amid a general decline of U.S.

manufacturing. The severest dovm- tuni since tlie Great Depression has accelerated tiie process. Many economists believe the recession reversed couise in tlie recently ended third quarter and they predict modest growtli in the nation's gross domestic product over tlie next few years. Yet tlie unemployment rate is currently at a 26-year high of 9.8 percent and likely to top 10 percent soon and stay tliere a while. "Many factors are pushing against a quick recovery," said Heidi Shierholz, an economist at the labor-oriented Economic Policy Institute.

"Things wall come back. But it's going to take a long time. I think we will likely see elevated unemployment at least until 2014." At best, many economists see an economic recovery without a return to moderate unemployment. At worst, they suggest the fragile recovery could lose steam and drag the economy back under for a double-dip recession, "We will need to grind out this recovery step by step," President Barack Obama said earlier this month. Obama and, congressional Democrats are having a hard time agreeing on how to keep the recoveiy going and help millions of unemployed workers short of another round of stimulus spending amid rising voter alarm over soaring federal deficits.

So far, they've been unable to win even a simple three- month extension of unemployment insurance for people in states with jobless rates above 8.5 percent. The extension easily passed die House earlier tiiis month but is bogged down in the Senate over disputes over which states would get the funds. Hundreds of thousands of people have already lost their benefits or are about to lose them. Tlie Wliite House credits the president's $787 billion stimulus plan passed in Februaiy for keeping job losses from becoming even worse. Since Obama took office in January, the economy has lost 3.4 million jobs.

Republicans argue that tiie stimulus program has not worked as a job producer and is a waste of tax money, And last week, the U.S. Chamber of Commerce launched a multimillion advertising campaign to celebrate smdl business entrepreneurs and to argue that iiirther government intervention will not spur permanent job growth. Chamber leaders called for creation of more tlian 20 million new private-sector jobs over the next decade, saying it's needed to replace jobs lost in die recession and to keep pace with population growtii. "The government can support a few jobs in the short- run" while free enterprise is the only system that can create 20 million of them, said Thomas Donohue, the chamber president. To many economists, such a goal seems unreachable given today's altered economic landscape.

'Tt's a new nonnal that U.S. growtii is going to be anemic on average for years. Right now, tiie prospect is bleak for any- tiiing otiier tiian a particularly high unemployment rate and a weak jobs-creating machine," said Allen Sinai, president of Decision Economics Inc. He says he doubts that unemployment will dip below 7 percent anytime soon. Many economists consider a jobless rate of 4 to 5 percent as reflecting a "full employment" economy, one in which nearly eveiyone who wants a job has one.

After tiie 2001 recession the rate climbed to 5.8 percent in 2002 and peaked at 6,3 percent in 2003 before easing back to 4,6 percent for 2006 and 2007. WUl unemployment ever get back to such levels? "I wouldn't say never. But I do think it's going to be a long time," said Bruce Bartiett, a former Treasury Department economist and the author of the book "The New American Economy: Tlie Failure of Reaganomics and a New Way Forward." "The linkage between giowtii in tile economy and growth in jobs is not what it was. I don't know if it's perma- nentiy broken or temporarily broken. But clearly we are not seeing the sort of increase in employment that one would normally expect," Bartiett said.

You should to your accountant assuming, of course, that your accoimtant does more for your business than simply add columns of numbers. In fact, you probably should do more Us- Jim Kendall tening than talking. A Snma business sawy accountant with clients in a variety of industries likely has a perspective that's worth hearing. Besides, says Tony Massaro, "Who else does a business owner have to turn to for advice? Employees have their peers in the company, but the owner sits alone." Well, maybe a banker, if you can find one who will talk to you. Maybe your attorney.

Perhaps members of yom- advisory board, if you have one. But Massaro, whose question was mostiy tongue-in- cheek, is right. Your accountant knows not only your business but others that have experiences that can be shared. Massaro is an accountant, a partner at Porte Brown, LLC, an Elk Grove Village-based CPA firm. Porte Brown is not our firm's accountant, but Massaro's awareness is something I've come to respect.

So, Tony, what are you saying to your clients as 2009 and hopefully the recession wind down? "First, I don't know tiiat we're out of the recession," Massaro says. "Some people are up, some are down. It's really not a surprise, but businesses that have been managed well have done much better. The otiiers really are hurting." From hpre on, the words belong to Massaro: You'll like this one, Jim. I tell our clients they need to market and network heavily.

When things really start loosening up, you want tobetiiere. Let your old customers know you're still here, but know what tiieir credit standing is. Don't take business just to take business. Watch your receivables, Watch your inventories. Make sure you can react quickly if tilings start slowing down again.

A lot of businesses didn't react quickly enough last time. Watch employee count, too. A lot of companies, especially in manufacturing, have gone to temps. There definitely will be a lot of write-offs, so this could be a good time to clean up your balance sheet. It's going to be bad anyway.

Plan for what the banks will want to see. It doesn't look like lending is loosening up. Some banks are lending to small businesses as long as they're not upside down, but it seems as though bankers are doing just as well with checking and deposit accounts. They're interested in relationships, not in taking lending risk. Margins have shrunk.

You're doing tiie same amount of work but not getting the same profit. Look out for inflation, when people start raising prices. Now back to me: Massaro isn't the only observant accountant I know. E-mail me if you'd like some names. Questions, comments to Jim Kendall, MarketingResources.com.

2009 121 Marketing Itesourcc's, Inc. 23 states report climb in unemployment BY CHRISTOPHER S. RUGABER Associated Press WASHINGTON Unemployment rose in 23 states, including Illinois, last month as the economy struggled to create jobs in tiie eaily stages of the recovery. While layoffs have slowed, companies remain reluctant to hii-e. Forty-three states reported job losses in September, while only seven gained jobs, the Labor Department said Wednesday.

Some of tiie states that lost jobs still saw their unemployment rates decline, as discouraged workers gave up looking for work. People who are out of work but no longer looking for jobs aren't counted as officially unemployed. That trend was evident nationwide in September, as nearly 600,000 people dropped out of tiie work force, the department reported earlier this month. The U.S. jobless rate rose to 9.8 percent in September, a 26-year high, from 9.7 percent.

Some economists estimate it would have topped 10 percent if there had been no change in the labor force. Illinois' rate jumped to 10.5 percent, tiie Labor Department reported last week, after a slight dip in August to 10 percent. There were some bright spots in Wednesday's report. Tlie Midwest region, hit hard during tiie recession by job losses in manufacturing, saw its unemployment rate drop for the second stiaight month, to 9.8 percent from 10 percent in August. It was the only region where the unemployment rate declined.

The Midwest benefited from sharp drops in unemployment in Indiana and Ohio. Indiana's jobless rate fell to 9.6 percent, from 9.9 percent in August and 10.7 percent in June, Indiana added 4,400 jobs, tiie most of any state, due to gains in tiie manufacturing and sei-vice sectors, Michigan reported tiie nation's highest unemployment rate at 15.3 percent. Store: Clothes are low-maintenance Continuedfrom Page 1 launching the Hollister line. Mixing his passion witii professional experience, the designer said Blake Standard is a contemporary women's sportswear line. "It's a chic, contemporary, comfortable brand," he said.

The shop, which opened Oct. 1, features clotiiing for work, travel and events, the It's important to him that the garments, many of them cotton, don't requfre a lot of maintenance. The wide array of shoppers range in age from 18 to 65, he added. He describes the ipieces "moderately priced." Designer Pierre Colorado will greet shoppers at liis new store this T-shirts go for $48, zip-up jackets are $96 and Alpaca blend sweaters are $142. Colorado picked Oakbrook Center for his debut store because of the demographics and the mix of retailers found at the outdoor mall.

The founder hopes to open additional stores in the near future. McDonald's, Burger King accused of selling bad chicken BY THOM WEIDLICH liloomherg News McDonald's Burger King Holdings Inc. and Friendly Ice Cream Corp. were accused in a lawsuft of selling chicken tiiey know contains a chemical that can cause cancer even in small amounts. McDonald's, the worid's biggest restaurant company, and tiie otiier dining chains were sued Wednesday in state court in Hartford, Conn.

The complaint, filed by Washington-based Cancer Project on behalf of two Connecticut residents, seeks class action, or group, status on behalf of people who bought or ate the grilled chicken from October 2006 to tills montii. "We're not looking to have tiiem stop selling tiie product," Daniel Kinburn, a lawyer with tiie Cancer Project, said in a phone interview. "The product is a legal though dangerous product that should be sold with a warning, like a chain saw." A similar suit against seven restaurant chains in 2006 and another against Yum! Brands KFC unit last montii were filed in California. Tliat state listed the chemical, PhIP, which forms during the grilling process, as a Imown carcinogen in 1994, according to the complaint. "At McDonald's we have some of the highest food safety standards in the industry," Cynthia Goody, director of nutrition at tiie company, said in an e-mailed statement.

"There is no scientific evidence to suggest tiie small amount of PhIP that can be created as a byproduct of cooking methods humans have employed fotx thousandsrof years poses a health risk." 'No Merit' "Burger King Corp. believes the lawsuit filed in Connecticut by tiie Washington- based Cancer Project has no merit," the company said in an e-mailed statement. "The compound referred to in the lawsuit, PhIP, is a natiirally occm-ring by-product of the normal cooking process and is produced when any poultry, meat or fish is broiled, fried or grilled. There is no evidence that the small amount of PhIP contained in food poses a significant health risk." "We ensure tiiat we meet or exceed all guidelines and regulations for food preparation and safety," Maura Tobias, a spokeswoman for Friendly's, said in an e-mailed statement, "Very low levels of PhIP occur naturally when any meat is grilled, including cooking at home." The companies "concealed the presence of a known carcinogen in their grilled- chicken products to retain profits that would be lost, in whole or in part, as a result of properly informed consumers choosing other food products," the residents said in their complaint. Burger King settled the first suit and agreed to post warnings in its Califorrua restaurants, Kinburn said.

The company wouldn't agree to a national settlement, he said. The case is otherwise unresolved, he said. KFC was sued separately because it added grilled chicken to its menu in April, he said. "Dozens of studies show even relatively small amounts of PhIP can increase the risk of various forms of cancer," Kinburn said. I.