Steve Glauberman had seen the clouds gathering for months. But the president of Enlighten, an Ann Arbor (Mich.) interactive-services company, figured a full-blown economic storm was about to break when, one after another, executives at competing new-media outfits began calling. "How's business?" they asked--just out of curiosity, they were quick to point out. "The phone's been ringing off the hook," says Glauberman, 44. "Ostensibly, it's to get together for lunch. But in reality they're trying to gauge their business activity against ours."
Glauberman, who founded his company 18 years ago and now has 55 employees and $10 million in sales, last remembers this sort of thing happening about a decade ago, on the eve of the last recession. "You do not get these calls when things are good," he says.
Think of it as the Glauberman Innocent Inquiry Economic Index. It seems as reliable as the official data, which these days tend to create as much confusion as clarity: Corporate profits drop, but the housing market is as strong as ever. Capital spending plummets, but consumer confidence edges upward. Amid such mixed signals, how can a small-business owner know what's really going on out there? The traditional indicators aren't all that helpful. After all, most economists are reluctant to declare a recession until long after a recovery is under way--too late for business owners forced to make crucial decisions on the fly. And most national data track corporations, not small businesses, where conditions are sometimes much different. So entrepreneurs have little choice but to become armchair economists themselves, interpreting the myriad and mundane indicators that surround them.
EYE ON THE STREETS. Look to the road, advises Frank King, CEO of Caira Business Forms Inc., a four-person commercial printing company in Norwood, Mass. Specifically, King, 54, keeps an eye out for trailer-trucks that bring new automobiles to the dealerships. These days, King sees a lot of rigs with only two or three cars on them--which he reads as a clear sign of bad times.
Karl Douglas, CEO of Warp Solutions Inc., a three-year-old New York software developer, also has a penchant for transportation-related indices. "People have stopped using Town Cars to get around to clients," says Douglas, 38, adding that his own 44 employees generally take taxis these days. By contrast, Greg Moran, the 29-year-old CEO of Pinnacle Technology Solutions, a Troy (N.Y.) staffing agency with 49 employees, knew conditions had undergone a decisive shift when he found himself traveling in relative luxury on a February business trip to Hong Kong. "I got upgraded to business class," he gloats. "A year ago, that would have been absolutely impossible."
Of course, it's one thing to take note of anecdotal indicators and quite another to actually use them as a basis for making decisions. "You can often be misled," warns Mark M. Zandi, chief economist with Economy.com Inc., a West Chester (Pa.) research firm.
ODDBALL STATISTICS. But if he generally avoids anecdotes, Zandi does keep a set of oddball data that wouldn't normally be considered as leading economic indicators. For instance, he carefully follows the U.S. Census Bureau's monthly report on sales of titanium dioxide. The chemical is used to create white paint, which is used in the manufacturing of everything from household appliances to automobiles. "It's a very sensitive and leading measure," Zandi says. Among his other favorites: hotel occupancy rates, mortgage applications, and travel to Las Vegas' McCarren International Airport, which as a top tourist destination is a good gauge of consumer attitudes. All of them, Zandi says, are as reliable "real-time" indicators of economic performance as many of the official statistics. "The hard data are subject to error, and those errors tend to be larger when the economy is changing quickly," Zandi says.
That's one reason why Jack Panzarella, founder of StreetGlow Inc., an auto accessories maker in Wayne, N.J., with 48 employees, has little patience for conventional economic wisdom. "Everybody just feeds off the media," he says. "I look at the facts." Chief among them is his own business' performance. StreetGlow's sales doubled to $16 million in 2000 and have held up. So while the rest of the industry scales back, Panzarella, 30, is increasing his advertising spending from $300,000 to $1 million. "If the economy slows down," he figures, "it will put the weaker guys out of business and make us stronger."
Parrish Hanna, president of Hanna Hodge Inc., a 12-person new-media outfit in Chicago, has little doubt that the economy has slowed in his area. "We used to close deals in four days," he says. "Now, the sales cycle may be six months long." Jill Gabbe, CEO of gabbegroup, a New York public-relations firm with 15 employees, has noticed the same kind of reticence, as once-enthusiastic clients are postponing or cutting back large projects. Then there's Rainbow Falafel, a fast-food shop near her office on Fifth Avenue. During the boom, most of the young technology workers in the neighborhood opted for $10 sandwiches and salads at the local gourmet deli. Now, they're lining up for $3 falafels. "People are hanging out the door," says Gabbe, 49.
MORE STIFF DRINKS. While gabbe tracks falafel, Jim Triandiflou, CEO of Ockham Technologies, a 50-person software developer in Atlanta, keeps his eye on eggs, biscuits, and grits--specifically those served at the OK Cafe, a greasy spoon favored by local entrepreneurs and venture capitalists. "Over the past year, the wait for breakfast has gone from 60 minutes to none at all," says Triandiflou, 35. "It's a classic bellwether on the state of the economy." Ryan Minor, CEO of Oncydium Corp., a four-person marketing company in Boston, prefers to look at beverages. According to his analysis of drinking habits in Boston and Cambridge, these times definitely require stronger medicine. "I'm seeing a lot more stiff drinks being poured," says Minor, 33. "Chardonnay is out. Martinis and Jack Daniels are in."
Perhaps that's because people were already drunk on optimism during the boom years, suggests Bradley Inman, CEO of HomeGain.com Inc., an online real estate service in Emeryville, Calif. For Inman, the most telling economic indicators have been the attitudes of his own 100 employees. "Employees are more devoted, committed, and less likely to depart," he says. "It's the end of 'my opportunities are unlimited."' Call it the Humility Index. Just don't wait for the Commerce Dept. to give it a number.
What are your favorite oddball economic indicators? We want to know. Send us a letter at firstname.lastname@example.org
By Larry Kanter
With Kimberly Weisul and Alison Wellner