Sixty days ago the financial markets were in the midst of a 30% decline during a ten day period that rocked the world’s economy. That ‘crash’ in world sotck markets triggered a staggering decline in the price of commodities, and more importantly, in the confidence of consumers. It’s ironic that the trigger for that crash, the approval of the $700 billion TARP bailout, was supposed to restore calm in the markets, but instead the government intervention sparked a panic that ultimately drove most investors to the sidelines.

Americans have short attention spans anymore. That includes American business owners. As Christmas approaches the panic that existed in early October seems to have given way to an acceptance that the economic downturn is real and most have begun to alter their planning accordingly. Almost everyone I know has taken an attitude of “I guess I’ll just work five more years than I planned after all.” And American consumers have also adjusted, slowing their spending noticeably, and expecting to spend less on themselves in the coming year.

American business owners are also consumers. In the two months since the ‘crash’ it’s becoming clear that in a more measured way the business owner has reacted to the crisis by anticipating next year’s tough business climate. Job cuts are beginning across all industries, and corporate spending has been curtailed signficantly.

The bad part of our collective short attention span is that we seem highly susceptible to economic new that is a regurgitation of the panic from October.

Since none of our economic tracking sources, especially not the government, is capable of being more timely than a month in advance (meaning that today’s announcements about some part of the economy reflect November actions in the best case), all the data we have seen of late has been a reflection of the fear that gripped us during the ‘crash.’ Today’s business section of the Post-Gazette is an especially good example, as the data reported is the November jobs and consumer spending. In October the fear was so great that banks were experiencing withdrawals and redemptions like the runs of the 1930’s. Is it any wonder then that consumers would spend less or employers would reduce hiring or cut jobs in November? For the same reasons, prospective homeowners have delayed buying decisions, businesses have cut advertising and captial spending, and travel spending became almost nonexistant.

This sentiment may have already receded. Certainly the initial Holiday spending data has been much better than anticipated (although most media seem to view that as a signal that it will be much worse later in the season), and businesses have begun to assess the prospects for 2009 more objectively, and most have come out of the bunker mentality already.

The danger for the remainder of the year and the first quarter of 2009 is that the economic data will still be mostly an echo of that very abrupt and traumatic two weeks in October. Yet, none of that data will really give us a clear picture of whether or not the recovery can begin soon, or whether we’re just at the beginning of an even deeper decline. This past week some of the nation’s best economic thinkers declared the recession to be a year old already. Using most economic historical trends as a guide, that means that the recovery is between three days and one year from beginning. How’s that for a clear signal?

Watch the data over the coming months but be careful to make your decisions after talking with your customers and vendors first. Be especially careful about listening to ‘experts’, especially those getting paid for their opinions. Try this litmus test: check out the experts’ opinions on the energy markets last summer. The most optimistic of that group was willing to say that oil was heading for $100/barrel after speculation cooled off; most were talking about $250/barrel and $8/gallon at the pump. If your ‘expert’ was in the latter camp in July, how reliable is his forecast right now?