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He Noticed

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He noticed. You know the situation has to be pretty serious when President Bush acknowledges, as he did last week, that the United States is facing “economic challenges” due to a number of factors and that “we cannot take growth for granted.”

While he again stated that the fundamentals of the economy are strong, the president did say that “many Americans are anxious about the economy.”

Simple and straightforward as it is, this is an extraordinary admission from a chief executive who ordinarily refuses to acknowledge anything that might leave a negative aftertaste surrounding anything that has happened on his watch. (“Heck of a job, Brownie!”)

Actually, I think the president’s words provide probably the clearest indication we’ve had so far that the country is headed for a full-blown recession.

It will be pretty remarkable if we don’t slide into a recession, what with the continuing (unending?) subprime crisis, the rise in oil prices, slower job creation and rising unemployment. And although inflation is supposed to be low, you’d hardly know it when you go to fill up your tank, fill up your shopping cart or fill up your oil tank at home as winter settles in. So, although inflation is statistically low, when you’ve had your fill of all these things, you find that your wallet is significantly slimmer than it used to be.

Yes, people are getting more anxious and economic concerns will start to play a much larger role in the ongoing (unending?) presidential election campaigns that have been with us for the last year, but which up to now have focused primarily on the war in Iraq and what to do about it.

Until now the effect on consumer spending has not been terribly significant, although it was a poor holiday season for retailers and purchases of new and existing houses have been trailing downward for the last few months. Things haven’t gotten tight for a lot of people yet and so the concern among consumers seems to be skin-deep. But it’s bound to grow more intense as unemployment climbs, housing sales continue to stall and credit remains difficult to come by for a lot of the population.

All of this matters to the life insurance business.

On the one hand, many of the industry’s products provide guarantees, something that can be so reassuring in a time of economic turmoil.

On the other hand, the wherewithal to purchase those products, many of which are bought with discretionary income, has a tendency to dry up when the economy is heading south.

The affluent population will, as usual, feel the sting the least. Since large swaths of the industry have been preoccupied with selling to this segment, the hit from a recession might not be devastating, but it will still have some effort.

But a recession will knock the wind out of any industry effort to reach the mass affluent, plain middle classers and those below, since these are the very people who will be feeling the pain the most.

Somehow it’s hard to think about retirement when you’re on unemployment and trying to stretch the dollars you have to cover the bills. Same for life insurance. Same for disability insurance. And long term care insurance? Forget about it.

This should make for some interesting times in the industry.

And for the country at large, the question is: Now that the president has noticed, what if anything, will he do about it?


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