Is social media causing the economic slowdown?

Is social media causing the economic slowdown?

September 1st, 2011 by Ellis Smith in Business Around the Region

Specialists Donald Vaneck, center, and Robert Tuccillo work on the floor of the New York Stock Exchange today. (AP Photo/Richard Drew)

Specialists Donald Vaneck, center, and Robert Tuccillo work...

Photo by Associated Press /Times Free Press.

Don't think of it as a recession.

Think of the nation's economic malaise as a realignment.

It's happened throughout history. Each time a disruptive technology like electricity or the Internet hits the market, periods of growth are inevitably followed by a crash, as business leaders struggle to fold the latest science into their companies' business plans.

This time around, U.S. companies are working to tackle challenges like social media, cloud computing and mobile connectivity.

That was the message on Wednesday from IBM's Martin Fleming, Big Blue's chief economist and vice president for business performance services.

"Crashes are part of the transformation period," he told a group of tech chiefs from Chattanooga-area businesses. "There is a lot of economic history where we've seen these various transformations happen over the course of time."

Forecast: cloudy

IBM analysts predict continued below-average growth for the foreseeable future, but recent market shocks like Japan's tsunami and the country's debt debate have pushed consumer confidence downward to the point where "the risk of slower growth has increased," he said.

"We have to look at the possibility that we might have negative growth as well," he said, though the possibility of a second recession is very small, he was careful to note.

Today's slowing economic growth is a symptom of business's efforts to merge their physical infrastructure with disruptive digital technology, Fleming said. EPB's Smart Grid exemplifies the marriage of traditional and digital infrastructure.

"There are significant changes going on in the economy as we move from one era to the next," he said.

In fact, the number of computer, network and communication workers has grown at a 53 percent rate through the recession, according to the U.S. Bureau of Labor Statistics. Through 2018, the Agency estimates that the number of tech workers will grow at a pace second only to health care workers, adding about 2.64 million new jobs.

That growth will come at a cost, however, as the number of manufacturing and other industrial jobs is expected to shrink by 1.3 million jobs, "as productivity gains, automation and international competition adversely affect employment," the BLS said.

"We're in for a long adjustment here," Fleming said. "It's going to take a while."

Reshuffling

The heavy emphasis on technology will put renewed responsibility on the shoulders of corporate information officers, said IBM's Tony Consiglio, who unveiled a 2011 analysis of the CIO's changing role in corporate America.

Long relegated to the role of "chief IT mechanic," more tech executives are now being looked to as pioneers, and drivers of new profit streams through social media and mobile applications, he said.

"Whatever you take on, you better have a business case for it," Consiglio cautioned.

Still some technology officers in hard-pressed sectors like manufacturing are using new technology not to create new products, but to streamline operations and cut costs, a role filled by more than half of CIOs, IBM's report found.

"There's no silver bullet here, you've still got to do the blocking and tackling," Consiglio said.

Local trends

At the local level, Chattanooga's reliance on manufacturing could be both a blessing and a curse, Fleming said.

While "the manufacturing sector has been one of the real strengths of this expansion in the auto sector, it has shown a lot of weakness over the past few months," he said.

New orders to manufacturers are one of the leading indicators of an economy's health, he said, so a continued recovery is "contingent on the ability of the manufacturing sector to rebound after these slow months," Fleming said.

Through it all, there's a silver lining to the country's economic speed bump.

"Pioneers are being asked to do things in a different way to adjust to the new business environment," he said. "The slowdown in growth has helped speed up the country's transformation."

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