Dr Jeff Cornwall

Tag Archives: stagflation

There’s a Storm Brewin’

Recession clouds appeared in the skies over Main Street, according
to the most recent National Federation of Independent Business Small
Business Economic Trends member survey. The NFIB Index of Small
Business Optimism fell 3.3 points in March to 89.6 — its lowest
reading since the monthly surveys were started in 1986, and the lowest
quarterly reading since the second quarter of 1980. The decline was
driven by a sour outlook for business conditions and real sales growth,
accounting for half the decline in the Index. Weaker plans to create
new jobs accounted for 21 percent of the decline.

“We are seeing recession readings,” said NFIB Chief Economist William Dunkelberg.

What is worse is that the labor market is still somewhat tight and price pressures continue to push costs up.

More signs that stagflation might be on the horizon.

Preparing for Tough Economic Times

My column in this week’s Tennessean offers some tips on how small businesses can best prepare for the possible tough economic times ahead. This will be a new experience for most entrepreneurs in America thanks to the long economic expansion we have enjoyed for most of the past twenty years.

Unlike the last period of stagflation in the late 1970s, we are now in an entrepreneurial economy — 50 cents of every dollar in the economy is generated by small businesses.
Small businesses are always tight on cash flow. And if their inputs of raw materials and other direct operating expenses go up, they may not be able to pass along these costs quickly enough to keep their cash flow positive. And they certainly don’t have large cash reserves to ride out the recession that is part of stagflation.