In April, Brian Beaulieu, CEO and chief economist for ITR Economics, takes the stage at the International Salon Spa Business Network in Coral Gables, Florida, answering the questions and calming the nerves of owners and executives at multi-location beauty business.
But first, he stopped by SALON TODAY and talked with Stacey Soble about the recent bank failures, inflation and how the pandemic will continue to impact the economy and how our government reacts to it.
When asked how he describes the current state of the economy, Beaulieu says, "Tumultuous, precarious and full of misleading headlines which make it very difficult for people to know what is going on. We're still dealing with the pandemic, for example inflation is a direct result of what our fiscal policies were during the pandemic and what the Federal Reserve did during the pandemic. So are supply chain shortages. All of that is still normalizing through the economy and we're dealing with the consequences. Then recently, there's surprise as a couple of banks fail and people get all shook up."
But before you begin to contemplate on bank failures and what happened during the Great Recession, Beaulieu offers a calming note. "We don't view this as a systemic banking problem, there have been two bank failures and each had poorly designed plans for dealing with 2022 into 2023, and they made the exact wrong decisions as interest rates were rising. It's not surprising that the weak banks are getting picked off, but the strong banks will be just fine."
Offering another good note, "The Federal Reserve decided last Sunday that all deposits would be guaranteed," he says. "We economists call that moral hazard or moral risk, we're teaching people that they don't have to be smart about their money--that when things get really bad that the old government will come to our rescue."
In the end for the professional beauty industry, it's about how the consumer feels about their own wallet, and when and where they are comfortable spending money, and Beaulieu continues to offer calming advice.
"The consumer right now is fundamentally good--the balance sheet is good. They are making more money than ever before even after adjusting for inflation. They are more in debt, but they can still handle the debt and that's what we look at," Beaulieu. "They are going to continue to spend money where they traditionally enjoy spending money and one of those areas is the beauty industry. I wouldn't want to be in the business of selling purely discretionary items, like the pet rock business, but to help people look good? That's a great business to be in."
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