Each passing month, each passing quarter, the news gets no better. The economy is going nowhere.
The National Federation of Independent Business Index of Small Business Optimism remains wallowing near its lowest levels since the NFIB first began this survey decades ago. In the 1980-82 recession the Index was below 90 in only one quarter. In this recession, the Index has been below 90 for six quarters, indicative of the severity of this downturn. The October index was 89.1. The baseline for this index is 100, which is based on 1986 responses.
The latest NFIB survey found that the employment outlook is still anemic. The "job generating machine" of our economy, small businesses, is still in reverse. In addition to weak hiring, small business owners continued to reduce compensation at a record pace, with 11 percent reporting reduced worker compensation. The latest survey from American Express OPEN also found that employers are cutting back on Holiday presents and bonuses to employees.
Some other highlights, or should I say "low-lights", form the latest survey:
Even though I tend to be a glass half full kind of guy, I do not share Dunkelberg's guarded optimism. Why? Washington continues to assume that government spending is the answer to our woes. Until they understand that small business needs tax and regulatory relief, I see no turnaround in our near future.
The National Federation of Independent Business Index of Small Business Optimism remains wallowing near its lowest levels since the NFIB first began this survey decades ago. In the 1980-82 recession the Index was below 90 in only one quarter. In this recession, the Index has been below 90 for six quarters, indicative of the severity of this downturn. The October index was 89.1. The baseline for this index is 100, which is based on 1986 responses.
The latest NFIB survey found that the employment outlook is still anemic. The "job generating machine" of our economy, small businesses, is still in reverse. In addition to weak hiring, small business owners continued to reduce compensation at a record pace, with 11 percent reporting reduced worker compensation. The latest survey from American Express OPEN also found that employers are cutting back on Holiday presents and bonuses to employees.
Some other highlights, or should I say "low-lights", form the latest survey:
- Capital spending is weak. Plans to make capital expenditures over the next few months fell 1 point to 17 percent, just 1 point above the record low last reached in August. Only seven percent characterized the current period as a good time to expand facilities, down 2 points from September.
- Only a net 11 percent expect business conditions to improve over the next six months.
- The net percent of all owners (seasonally adjusted) reporting higher sales in the past three months remained low at negative 31 percent, down 5 points and only 3 points above the record low last set in July.
- Small business owners continued to liquidate inventories, and weak sales trends gave little reason to order new stocks. A net-negative 26 percent of all owners reported gains in inventory stocks (more firms cut stocks than added to them, seasonally adjusted),
- Earnings continue very weak, which is cited as a contributor to the reported difficulties in obtaining credit.
Even though I tend to be a glass half full kind of guy, I do not share Dunkelberg's guarded optimism. Why? Washington continues to assume that government spending is the answer to our woes. Until they understand that small business needs tax and regulatory relief, I see no turnaround in our near future.
Small business does need tax relief, but what it needs more is customers. It does no immediate good to put money in the hand of a lender - or a business owner - when there is insufficient demand for goods and services.
The recovery we have seen so far is on Wall Street - but there has been NO recovery on Main Street. What our economy needs is jobs. The hundreds of billions we have poured into institutions has circulated mostly among institutions, and has done nothing to kick-start an econmy based upon employment. Small business is not our "economic engine" as so many have claimed. Our economy depends upon average people spending money - which requires that those people are employed. Economic recovery and stability require high levels of employment.
Extending unemployment benefits is a poor substitute for creating jobs by funding public works which are badly needed. We have over 20 million Americans looking for jobs, and we have a national infrastructure which is rapidly deteriorating. It doesn't take a genius to understand that the needed work could be performed if our stimulus dollars were directed at funding government-paid jobs. What it will take is a coalition of economists and advisors with the courage and integrity to buck the established trend of insisting that wealth moves downward through the economy. Right now, wealth isn't trickling down, it's just circulating at the top level.
This is not college-level analysis. It's just common sense.
Tax cuts not only put money in the hands of entrepreneur, but also in their customers' hands. Tax cuts work in down economies -- look back on Kennedy, Reagan and Clinton who all used tax cuts successfully to spur growth.
Also not college-level analysis -- just experience.
It is true that tax cuts help everyone to some degree. However, reducing income tax has very little effect on unemployment compensation. The only tax cut that offers immediate relief is a reduction in sales tax, which rarely happens. The root of the problem inevitably boils down to getting money in circulation via spending. This requires either giving away money, or creating jobs so that Americans can earn money to pay bills, buy durable goods, go out to dinner, etc..
No jobs means no money at the street level. I will rephrase what I believe to be obvious - an entrepreneur will remain in business only as long as a customer base exists for their product or service. That customer base - for the vast majority of small businesses - consists of hourly wage earners and salaried employees. If the service and retail sectors stand idle, the economy stalls. Regardless of how Wall Street fares, Main Street IS our economy.
Why stock shelves when inventory will gather dust? Why hire when contracts for services are rare or non-existent? Why manufacture when retailers are not ordering inventory? Why lend when John Q. can't make monthly payments? Everything comes down to the need for jobs, now.
This economy is way beyond a quick fix. You need to get out of that way of thinking. We have major structural problems -- over taxation, over regulation, and loss of property rights -- that need to be rectified.
Everything does not come down to jobs, now. It comes down to getting free enterprise back on track so we can build real jobs into the future.
Feel good economic policy is only making things worse.