How Long to Post-Recession Job Levels? Expect Huge Merger Wave in Any Case

So what does this chart showing job recoveries after recessions since World War II suggest to you (Click on image for larger view)?

Obviously, the immediate past recession was more costly in terms of jobs than any comparable recession since WWII.

The discouraging question is whether the job recovery curve looks more like the shallow "U" shape of the 2001 recession or all the others, which are "V" shaped.

You can make your own decision about which curve will manifest itself this time. But logic suggests the recovery will take a while, simply because the curve already looks more like 2001 than any of the other curves. Also, none of the other recoveries had to face the financial headwinds imposed by our shocking, and growing, deficits, which will crowd out private capital that is the fuel for business growth.

A rough guess, given the depth of losses, which are twice that of the 2001 recession, suggests it might take twice as long for the economy to return to the level of jobs it had when the recession started. That would be 40 months, or roughly 3.3 years from today.

But that assumes no additional fiscal drag from the deficits, and nobody seems to think that is reasonable. So some believe it might take six to eight years. As one might assume, this will make for sluggish sales growth.

In a business such as telecommunications, which irrespective of the recession was in the throes of a massive transformation of its core business model, which will in any case require replacement of perhaps 50 percent of its existing current revenue by new sources over a 10-year period, and perhaps another 50 percent of revenue over perhaps a 20-year period.

Those would challenges enough for virtually any industry, without the pressure of sluggish job and housing growth and high structural deficits. Normally, sluggish growth in the telecommunications business has lead to mergers and acquisitions, since one way to obtain growth in a sluggish market is to buy that growth in the form of acquired customer bases, revenues and assets.

One has to expect quite a lot of that in this environment.

Grande in Play

Grande Communications appears to be in play. Its board of directors has authorized management to "explore strategic alternatives to enhance shareholder value." That's a "for sale" sign posted by one of the largest "overbuilders" in the U.S. market.

Grande has retained Waller Capital to assist the board and management in exploring strategic alternatives.

Grande is in the process of building a deep-fiber broadband network to homes and businesses in portions of Austin, Corpus Christi, suburban northwest Dallas, Midland, Odessa, San Antonio, San Marcos and Waco. The San Marcos-based company offers high-speed Internet, local and long-distance telephone and digital cable.

International Long Distance: Merger Wave Coming

Look for a wave of mergers and outsourcing in the international long distance business in 2008. The issue is that voice traffic growth is slowing sharply after decades of rapid growth. That means more volume is needed to keep a business cash flow positive or profitable. Not every global carrier will be able to attain that level of scale, so executives are going to have to consider buying wholesale capacity and abandoning operation of their own networks.

That, of course, is a business opportunity for wholesalers with the ability to handle a large amount of additional traffic.

International voice traffic grew approximately 15 percent annually, from less than 18 billion minutes in 1986 to just under 300 billion in 2006. But international calls grew only 10 percent in 2006, and signs point to continued sluggish growth in 2007.

Skype and other computer-based voice services are a key reason for the slowdown. "Skype only accounts for a small share of international calls, but the volume was enough to cut global growth in half," says TeleGeography analyst Stephan Beckert.

Deathstar!

Scott Moritz at TheStreet.com says at&t is gearing up to buy EchoStar fast. The logic is unassailable. at&t wants to get big in entertainment video. It will take a long time to get its entire network revamped to do so. Buying EchoStar puts at&t right into the big leagues with more than 13.6 million subscribers. Competitor DirecTV has about 16.2 million subscribers. So by acquiring EchoStar, at&t immediately vaults into a position where it serves more than 45 percent of the U.S. satellite-delivered multichannel TV market.