and consumers can expect in 2023.

This is a weird year I feel like from an economic standpoint.

There are indicators all over the place, right?

We've got record unemployment on one end but also still record inflation even though it's not still going up on the other end.

It makes it hard, I think, to decide, well what are the smart plays for the year and what's the economy likely to do?

Just start off giving me a thumbnail of what you think we're dealing with and anticipating in 2023.

- Well, I think you hit the nail on the head and we're seeing inflation is still high.

It is slowing down.

It's been kind of bumpy the last couple of months.

I think it'll be safe to assume that inflation is still gonna be relatively high in 2023.

In terms of other economic data, we suggest we see that credit card balances soon remain fairly high.

Housing prices are beginning to subside as a result because the interest rates have continued to increase.

I mean, you can finance a home at 6%, and just a couple of months ago was about two and a half, three percent.

- Yeah.

- So the inflation is driving up those prices as well.

The economists are trying to cool it down.

So I think the challenge this year is going to be how do we continue to control the economic value that we're seeing across the country, and how can people continue to control their expenses as well?

- So what are we looking at in terms of people who own businesses and are making plans for the year and maybe making decisions?

What kinds of things should they have in mind for this year?

- Well, let me start by saying particularly for black businesses, let me just say that earnings are down significantly relative to the population at large when it comes to white businesses year over year.

So the third challenge is that businesses are going to look, particularly black businesses but it's also equates to all businesses.

Go back and review your bottom line.

Go back and review your expenses.

Make sure that you have a plan.

You're not taught about this before.

Make sure you have a backup plan in place.

Do you understand where your sources of revenue are coming from?

Are you beginning to or enhancing enabling technology to deliver your services?

So you really need to go back in and retrench if you will and look at your current business plan.

Look at the technology capabilities that you may or may not have and apply those directly into your business as you think forward.

- Yeah, so the cost of borrowing money, that's of course related to inflation and then the interest rate hike has special implications for business owners.

What are you counseling, especially as you point out given the reduction in sales and in revenue that black businesses in particular are facing.

Is this a time to even think about borrowing?

- I always say we've heard this phrase haven't you before, Stephen?

Cash is king.

- Cash is king.

(laughs) - Cash is king.

That's honest about it.

If you have cash in the bank, again I'm not a financial planner, I would encourage you to talk to a financial planner or a financial advisor, but cash is always king.

If you're going to use credit, I would recommend you'd be very judicious with it.

Because what's gonna happen is that your monthly payments are going to continue to increase.

Let's take the housing for example.

The cost to borrow money again has gone off from two and a half, 3% to over 6%, and you run the math on $100,000, $200,000 home.

At that rate, that's a significant increase for families.

So from a business perspective, if you're looking to chart for services render and you gotta pay back that credit card via the mindset you're gonna pay more than a monthly basis.

So I always encourage people, if you have the cash, if you have the resources available, try to use those resources appropriately and try to minimize the credit, the debt creation, if at all possible.

- Yeah.

So you mentioned sales being down and as a a result, of course revenue goes down as well.

Talk about what's driving that and why it's so acute in black communities, among black businesses right now.

- That's a great question.

I just had a conversation about two or three weeks ago of a successful black business that launched five or six years ago.

They abruptly shut down within the last month.

- Oh no.

- And I asked a question, I said why?

What happened?

And this individual was very candid with the downtown area.

They said, quite frankly, people just stopped coming to us because of the pandemic.

This individual tried to modify and use technology, deliver those services.

People at that point had made a decision to go elsewhere.

So one of the challenges that we're seeing is it's important that people support small businesses.

This is not the time to turn your back on small businesses.

And this individual is very direct with me and said the customers that they had quite frankly disappeared.

And from a black business perspective she said that they went from her business to other businesses across the city and into the suburban areas.

And quite frankly they went to white businesses.

- Wow.

- So the bottom line is it's important that we continue to allocate and spread your resources appropriately and also choose to support those small black businesses that account for a significant part of Detroit's economy, as well as the national economy as well.

- Yeah.

I always like to think of individual economic questions and issues in the frame of home ownership first because that is of course still the best way to build wealth and things like that.

Talk about this housing market.

There's really strange dynamics there too.

Low inventory, but high prices, in terms of sales in some cases.

But then you've got these crazy interest rates too.

- Yeah.

- That's made buying a house more expensive than it used to be.

Should African Americans in particular even be participating in purchasing homes this year?

Or should we be waiting until things cool off a bit?

- No, I think it's always encouraged, again if you have the resources, if you can invest in purchasing a home, you should.

Why?

Because that's still a person's biggest investment in terms of creating wealth.

And if you sit out another year, it's kind of like playing the stock market.

I don't play in the stock market but we've all heard this phraseology, you wanna diversify your portfolio.

You don't know what the market's gonna do for the next day or for the next year.

And if you have the resources, you're right.

We are in a crazy market right now when it comes to housing, when it comes to inventory, when it comes to cost.

So go back and evaluate your personal finances.

Go back and evaluate your resources.

If you have the opportunity to purchase a home at this point, that's for you to make your own personal decision.

But in terms of wealth generation, that's one way that we can continue to build wealth.

And as it comes to housing for blacks, we are still underrepresented in the marketplace when it comes to purchasing homes.

Therefore you still have that wealth gap when it comes to home ownership.

- Yeah.

So one of the big questions on everybody's mind is whether all of the strangeness in the economy is ultimately signaling that we're gonna go into a recession.

And of course politicians worry about that, economists worry about that.

But individuals and businesses have to worry about it too.

What should people be doing to prepare for the possibility of a recession?

If it's gonna happen?

- There is a lot of speculation.

Again, I've talked to a lot of businesses, I've talked to economists as well.

There's a mixed bag.

Some people are saying it will be a mild recession in 2023.

Some people are saying it might be pushed back to 2024.

My recommendation is very simple.

As soon as there's gonna be a recession, manage your business appropriately.

And what I mean by that is don't go on a spending spree.

Spend prudently as if you have a plan.

Do not go over budget.

Invest your resources and those items that will give you the best return on the investment.

Identify the people that know how to quite frankly who can help you allocate those resources.

So at this point in the situation, assume there's gonna be a recession.

Hopefully there won't be, assume it might be a mild recession, and adjust your business model and your expenditures accordingly.

Now is not the time to go on a spending spree.

- What about in individuals?

Same advice or maybe different?

- Again, I would give the same advice.

I would give the same advice to individuals.

I mean, I'll use myself as an example.

I'll be rather candid.

I'm pretty transparent.

I have adjusted my spending spree, right?

Let me back up.

I've adjusted my spending expenditures, from a business standpoint.

I do have a corporate credit card for my business.

I made a conscious decision to pay off that corporate credit card.

Why?

Because I did not wanna pay the additional expense on a monthly basis.

And that's the advice that I would give to the viewers today.

If you have the opportunity, if you have the resources, from a business standpoint, from an individual standpoint, now it's the time to modify your spending.

If you could pay off your credit cards or any outstanding debt, I strongly recommend that you do that.

If you're not sure of exactly what to do at this point, spend some time with a financial advisor.

- Yeah.

And hunker down and hope that things get better, not worse as we get deeper in the year.

Mark Lee, it's always great to have you here to give us a sense of what's going on in the economy and businesses and black businesses in particular.

Thanks so much for joining us on American Black Journal.

- I appreciate it.

Thanks again.