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THE ELECTION, SMALL BUSINESS, AND THE ECONOMY

THE ELECTION, SMALL BUSINESS, AND THE ECONOMY. WILLIAM DUNKELBERG CHIEF ECONOMIST, NFIB PROFESSOR OF ECONOMICS EMERITUS TEMPLE UNIVERSITY. SMALL BUSINESS FACTS. 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES 99% HAVE FEWER THAN 500

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THE ELECTION, SMALL BUSINESS, AND THE ECONOMY

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  1. THE ELECTION, SMALL BUSINESS, AND THE ECONOMY WILLIAM DUNKELBERG CHIEF ECONOMIST, NFIBPROFESSOR OF ECONOMICS EMERITUS TEMPLE UNIVERSITY

  2. SMALL BUSINESS FACTS • 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES • 99% HAVE FEWER THAN 500 • PRODUCE HALF OF THE PRIVATE SECTOR GROSS DOMESTIC PRODUCT • EMPLOY 50%+ OF PRIVATE SECTOR EMPLOYEES • PRODUCE 2/3RDS OF THE NEW JOBS

  3. TWO WAYS OUT, NEITHER DESIRABLE

  4. Young Ben

  5. RATING OF GOVERNMENT POLICY

  6. MOST IMPORTANT PROBLEMS 1. RISING HEALTH CARE COST (1) 2. COST OF REGULATIONS AND RED TAPE (5) 3. FEDERAL TAXES ON BUSINESS INCOME (6) 4. UNCERTAINTY ABOUT THE ECONOMY (2) 5. TAX COMPLEXITY (7) 6. UNCERTAINTY FROM GOVERNMENT POLICY(4) 7. FREQUENT CHANGES IN THE TAX CODE (8) 8. PROPERTY TAXES (9) 9. STATE TAXES ON BUSINESS INCOME (10) 10. FINDING QUALIFIED LABOR (32) (2012 RANK)

  7. UNCERTAINTY SUM OF “DON’T KNOW” “UNCERTAIN” ANSWERS ON 6 QUESTIONS UNCERTAIN CERTAIN (GOOD OR BAD)

  8. JOB GROWTH IN TWO NBER RECOVERY PERIODS, 1983 AND 2009 AVERAGE 689,000 AVERAGE 438,000 (535,000) QUARTERS OF RECOVERY GDP GROWTH: “83” 4.5% “09” 2.1% HAVER ANALYTICS

  9. REAL GDP GROWTH IN NBER EXPANSION PERIODS THE WEIGHT OF GOVERNMENT

  10. SMALL BUSINESS OPTIMISM INDEX(QUARTERLY, 1986 = 100) PEAKED Q1/2015 AS DID UofM

  11. GDP GROWTH RATE (QUARTERLY AT ANNUAL RATES) HOUSING MFG/EXPORT NFIB DATA FIRST MONTH EACH QUARTER

  12. EXPECTATIONS FOR BUSINESS CONDITIONS IN 6 MONTHS(PCT “BETTER” - PCT “WORSE”)

  13. EXPECTED BUSINESS CONDITIONS IN 6 MONTHS OCTOBER PERCENT OF FIRMS NSA

  14. OUTLOOK FOR BUSINESS EXPANSION(PCT “NOW IS A GOOD TIME”) “NO” for 30 QUARTERS

  15. BAD TIME TO EXPANDDUE TO THE POLITICAL CLIMATE % OF THOSE SAYING “BAD TIME”

  16. REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3) RECESSION ENDS

  17. EXPECTED REAL SALES

  18. “EXCESS” DEBT: PAYING FOR THE “PARTY” MAINTAINING DEBT/INCOME RATIO IN 1999 HAVER ANALYTICS

  19. THE DEBT DEATHSPIRAL

  20. Consumer Net Worth BELIEVABLE??? HOUSING DOT COM

  21. Consumer Net Worth Relative to GDP BUBBLE???? BUBBLE BUBBLE AVERAGE 1970-1994 RECESSION

  22. REGULAR BORROWING ACTIVITY(AT LEAST ONCE A QUARTER)

  23. SMALL BUSINESS CREDIT PROBLEMS(% HARDER TO GET - % EASIER)

  24. ALL CREDIT NEEDS NOT SATISFIED

  25. LOAN DEMAND: PERCENT NOT WANTING A LOAN RECESSION STARTS

  26. BILL PAYMENT, RECEIVABLES COLLECTION AND TRADE CREDIT FIRST MONTH IN EACH QUARTER NET % WITH A FAVORABLE RESPONSE

  27. SINGLE MOST IMPORTANT PROBLEM FACING OWNERS FIRST MONTH IN EACH QUARTER CREDIT: NO PROBLEM

  28. NET PERCENT REPORTING HIGHER INTEREST RATES[ ON THE LAST LOAN]

  29. OUR UNCERTAIN MONTH TO MONTH MONETARY POLICY • Fed’s Mester Says Case for November Hike Will Likely Be Strong, Bloomberg.com: Economy, October 3, 2016 • Fed’s Dudley Advises Caution in Raising Interest Rates, Bloomberg.com: Economy, October 3, 2016

  30. NIRP UNINTENDED CONSEQUENCES

  31. HOW HELPFUL IS FORWARD GUIDANCE? “But, if inflation were slightly above 2 percent even as unemployment remained far above levels consistent with maximum employment, then the unemployment consideration would dominate because we would be further from the unemployment objective than we are from the inflation objective.” NY NABE May, 2014

  32. ACTUAL PRICE INCREASESSEASONALLY ADJUSTED FIRST MONTH IN EACH QUARTER

  33. CHANGES IN PRICES AND LABOR COMPENSATION FIRST MONTH IN EACH QUARTER

  34. UNFILLED JOB OPENINGS% WITH AT LEAST ONE UNFILLED OPENING

  35. REASONS APPLICANT “NOT QUALIFIED”

  36. JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE

  37. MOST IMPORTANT PROBLEMS FIRST MONTH IN EACH QUARTER

  38. AVERAGE CHANGE IN EMPLOYMENT PER FIRM

  39. PREDICTED AND ACTUAL UNEMPLOYMENT RATE

  40. PERCENT OF OWNERS INCREASING OR REDUCING EMPLOYMENT FIRST MONTH IN EACH QUARTER

  41. NET PERCENT OF OWNERS INCREASING EMPLOYMENT

  42. ACTUAL CAPITAL OUTLAYS LEASING ADDED FIRST MONTH IN EACH QUARTER

  43. PLANNED CAPITAL OUTLAYS(NEXT SIX MONTHS)

  44. ACTUAL CHANGE IN INVENTORY(% INCREASING - % REDUCING)

  45. INVENTORY INVESTMENT PLANS[% PLAN INCREASE – % PLAN DECREASE]

  46. Quarterly ISM NON-MFG INDEXpredicted by NFIB survey Q3 NMISM READING 4Q FORECAST BASED ON OCT NFIB DATA SURVEY FIRST MONTH IN EACH QUARTER

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