What Happens When We Hit Bottom?

The economy appears to have hit bottom. This is good news, but there are caveats.

First of all, not all industries will recover at the same rate. Communications never fully recovered from the dot-com bubble. Anyone who bet big on a communications recovery has either switched careers or retired. Now it looks as if the auto industry will be dragging for some time, and companies that hitched their future to that wagon will be feeling pain for some time. Electric cars are still little more than a second car for the rich and plug-in hybrids are still years from mass production—and in between, no one wants to plunk down a large sum of cash unless they have to.

Second, it also doesn’t mean the economy will recover quickly or that more jobs won’t be eliminated. Jobs are a trailing indicator, and virtually everyone knows someone out of work. That tends to dampen the exuberance to spend money. But system-level design is a leading indicator, if that’s of any comfort. Jobs should return to this industry first, even if they aren’t necessarily in markets that you know or in places that you want to live.

One of the best positive markers is the stock market. It bottomed out at 6520, and it could well plummet again. But with banks paying the lowest interest rates in decades for savings, many people have started returning to the markets. They may be ahead of the overall recovery, but that money can be used to fund business deals and get the economy moving again, which starts an upward cycle again.

Second, the stimulus money will begin filtering into the economy over the next few months, as well. That will add more fuel for businesses to spend money, whether responsibly or not. But at least there will be something to work with.

None of this means the economy will recover quickly. Even if the market goes up, it can seesaw for awhile. But we are seeing some positive signs of change, including predictions from foundries of a better second half and more design exploration that will lead to the purchase of new tools, new equipment and ultimately to tapeouts. The good news is that will leave us all thinking about time-to-market issues again—instead of the markets themselves.

—Ed Sperling