The New Normal means, among other things, lower growth, continued high unemployment, more regulation (because nobody on either side of the public/private equation can afford another financial crisis any time soon)





The phrase gained a lot of traction in the financial world courtesy of the smart guys over at Pimco, which manages more than $1 trillion of investor money and was making noise about an unsustainable, over-leveraged economy well before the meltdown whose two-year anniversary we mark this month.

How time flies when you’re slogging.

“The basic premise is that we are in the midst of a major national and global realignment,” Mohamed El-Arian, the firm’s CEO and co-chief investment officer, told USA Today last month. “The main catalyst was the financial crisis of 2008, but the underlying factors have been there for a while. The question is: What does the world look like post-realignment? The world is on a bumpy journey to a new destination and the New Normal.”

The New Normal means, among other things, lower growth, continued high unemployment, more regulation (because nobody on either side of the public/private equation can afford another financial crisis any time soon; El-Arian calls it “lower speed limits with more cops on the highway”), the migration of growth from the deleveraging industrialized world to wealth-building emerging economies, and a volatile investment environment where you should be more concerned with the return of your capital than the return on your capital.

In other words, a big challenge that’s not going away in the foreseeable future.

It also means recalibrating the private/public debate toward more cooperation and less confrontation because most people, at least those without an ax to grind, believe that the health of the American economy increasingly depends on enlightened government action.

“We think the coma will last for years unless government policy changes to re-stimulate the private sector and bring unemployment down,” said Bill Gross, Pimco’s co-founder, in an interview with The New York Times last month.

He basically favors a second stimulus focused on infrastructure improvement, clean energy and job training, something that the Obama administration would have great difficulty selling politically right now.

Take climate-change legislation, the failure of which in Congress this session prompted an exit of clean energy investment dollars in the United States from Deutsche Bank to other parts of the world - and this dismissive response from Kevin Parker, global head of asset management: “They’re asleep at the wheel.”

At the ground level Americans have been living the New Normal for two years now. The savings rate in June was more than 6 percent (it was typically between 1 percent and 2 percent prior to 2008), and they saved $400 billion more last year than they did in 2005.

In a low-growth environment the impact on gaming revenues has obviously been felt.

As for the demand characteristics of this reshaped consumer market, beyond finances, some perspectives that make sense are beginning to emerge, and there’s some good and bad news.

Vacations, it seems, are in, but buying things is out. “It’s better to go on a vacation than it is to buy a couch,” Elizabeth Dunn, a psychology professor at the University of British Columbia, who researches the issue of consumption and happiness, told the Times. She said that spending money for an experience - concert tickets, French lessons, sushi-rolling classes, a hotel room in Monaco - produces longer-lasting satisfaction than spending money on “plain old stuff”.

That would seem to give a place like Las Vegas a fighting chance. At the very least it explains the phenomenon of respectable visitor volumes and falling gaming revenues (and the typically dead atmosphere at high-end retail boutiques this summer).

The Times further writes: “According to retailers and analysts, consumers have gravitated more toward experiences than possessions over the last couple of years, opting to use their extra cash for nights at home with family, watching movies and playing games - or for ‘stay-cations’ in the back yard. Many retailing professionals think this is not a fad, but rather ‘the New Normal’.”

“I think many of these changes are permanent changes,” said Jennifer Black, president of the retailing research company Jennifer Black & Associates and a member of the Governor’s Council of Economic Advisors in Oregon. “I think people are realizing they don’t need what they had. They’re more interested in creating memories.”

So there it is, a glimpse of light for the gaming industry, and not just for Las Vegas. Anyone in leisure entertainment is selling an experience. The winners will be determined by the amount of customer-focused creativity they can advance at the ownership and property level. They’ll be the ones who elevate that statement from stale cliché to an ever-evolving and meaningful reality.