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Quality and Price Trade-Offs Are Disappearing Labor economists tell us we are facing what they call an hourglass economy, says Chris Neugent. “This means there’s a growing number of households at both the top and the bottom of the income scale, but remarkably fewer in the middle,” he says. “This growing bifurcation of income is deepening and is a huge challenge for us both economically and culturally. The average American household earns less today than it did at the end of the recession.” Neugent doesn’t see any indication that the growing divide in earning power in society will abate any time soon. “This trend will challenge our country’s ability to compete in a global economy,” he says. “I think that we can expect the business environment to continue to be extremely competitive and volatile, as consumers are showing a willingness to shift their loyalties more quickly than ever before. An increasing portion of the market is demanding more value as pocketbooks are stretched.” In the past, it may have been possible for businesses to compete by assuming that consumers would be willing to make lots of trade-offs, such as accepting a slightly inferior product if offered at a low price. However, today’s consumer wants it all. “I think that type of reality is raising the bar for all of us,” he says. Recession Demonstrated Global Connectivity Barbara Mowry says the recent financial crisis really showed us how globally connected we are, as bank failures in one country had a large impact on banks in other countries more than ever before. Businesses have had to adapt to more global supply chains, better risk management, more ambiguity, and more and more automation to increase productivity and expand markets. Mowry did notice that small businesses and large businesses were not equally affected. “Small business in general was harder hit,” she says. “That has given rise to new efforts to spur business formation, such as financing through crowd-funding, accelerators, incubators, and many efforts to help smaller and entrepreneurial ventures get started.” Mowry says she expects the economy to continue to improve, however it will not be a rapid improvement, as it takes longer to recover from both a deep recession and financial crisis at the same time—the last major one was the Great Depression. “I am optimistic that our country can continue to innovate, increase productivity in the economy, and adapt to the global and skill changes required, though as with all change, there will be some pain involved,” she says. 12 UNIVERSITY OF MINNESOTA John Penshorn, ’94 MBA Senior Vice President, Investor Relations UnitedHealth Group U.S. Is a ‘Growth Company’ Since the recession, John Penshorn notes that the economy has moved from a liquidity crisis to a worldwide reflation effort, with attendant monetary support from central banks in the U.S., Europe, Japan, and elsewhere. “The monetary policy moves have stabilized housing values, but they have had a more direct positive effect on the value of other assets, such as stocks and bonds,” he says. The business community is seeking to balance the impetus for growth with its readings on the durability of the recovery. “The increases in costs and regulation pressure the natural resiliency of our economic system, resulting in cautious hiring and a more muted recovery,” he says. “The economy’s response after the U.S. Federal Reserve eventually withdraws its market support is still unknown.” The Fed’s clear “taper” strategy and its transparent communication are helping the market and the economy to ease away from the support this has provided. “An effectively executed taper—one that sustains capital availability while not promoting speculation, one that creates a smooth handoff from stimulus to a free-standing, self-supporting economy—would be a tremendously positive accomplishment,” he says. “This needs to occur in multiple national financial systems because our global economy increasingly interconnects.” Barbara Mowry, ’75 MBA CEO Gore Creek Advisors Chairwoman Kansas City Federal Reserve


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