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NFIB Small Business Optimism Index rose 2 points to 93.4


The latest Small Business Optimism Index rose 2 points to 93.4, mostly reversing the February decline but failing once again to breach the 95 ceiling that has capped the Index during the recovery. Six of the Index components improved, two were unchanged, and two were lower. The net percent of owners planning to create new jobs did fall 2 points but remained positive even if weak. The outlook for real sales gains accounted for about half of the improvement with inventory satisfaction and inventory investment plans accounting for most of the rest. However, throughout this recovery these types of increases have generally gone nowhere. As long as Washington continues to ignore policies that could restore the middle class growth and job creation will continue to be subpar.

First quarter GDP growth is looking pretty slow at just under 2 percent. Weather, trade deficits, and pessimistic consumers and business owners are all taking a toll on spending growth. Uncertainty remains elevated. Consequently, hiring will remain muted compared to previous expansions. There is lots of talk about this looking more like a “new normal”, that the nature of job requirements changed dramatically in the recession.

Certainly firms trimmed all the fat and then some in the last 6 years, but technological change wasn’t that dramatic since 2008. Many of the “long term unemployed” would find jobs in an economy with 500,000 more housing starts and a consumer base more willing to spend on services. Washington is floundering and the economy is following suit.

The President is pushing for a 39 percent increase in the minimum wage to address income inequality, to stimulate the economy and help the poor. None of this will occur as jobs will be lost according to a mountain of research and the CBO’s recent report. Certainly not much stimulus there, and most of the increased wage payments will go to families well above the poverty level which is no help for the poor. In addition to fewer jobs, prices will increase to cover the higher labor costs as owners will be paying more for the same work with no extra output. So for every dollar a minimum wage worker receives, it will come out of the pockets of the customers they serve, no increase in spendable income overall. In 2000, firms paid more than the minimum wage to fast food workers because demand was strong and workers generated sales that justified the higher pay. When demand fades, workers can earn less but have a job – unless the minimum wage compels the employer to fire the worker.

The President’s budget contains a billion dollars for “climate change” while the unemployment rate is 6.7 percent and millions can’t find work. The policies that could restore the middle class status of millions by providing job opportunities are not pursued. This will insure that growth and job creation continue to be sub-par.






Posted: April 8, 2014 Tuesday 07:30 AM




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