Research >> Economics
NFIB Small Business Optimism Index down 3 points to 91.4
|
There was no good news in the June survey. The Small Business Optimism Index posted a decline of 3 points, falling to 91.4. This is a clear indication of slow growth. Only one of the ten Index components improved, expected credit conditions. Labor market indicators, spending plans for capital equipment and inventories took a drubbing, accounting for about 40 percent of the decline. Neither the SCOTUS decision or the highway spending bill effects are included in the June data.
The Index plunged 3 points in June, that’s a lot. The 10 Index questions lost a total of 30 percentage point in net favorable responses. The impact of the SCOTUS decision on health care will show up in the July survey as it occurred late in the month, ditto for the transportation bill which didn’t make much of a news splash. The health care decision was probably not what most owners expected, so “disappointment” over that will be reflected in the July survey responses. With over 20 new taxes ($800 billion) and most of the regulations yet to be written by HHS, the implications for employee costs remain unclear.
The rumored hiring of thousands of IRS agents to enforce the health care rules will certainly add to employment and Gross Domestic Product (GDP) since our accounting rules simply assume that the value of the output produced by a government worker is equal to their wage. An equal number of workers using their personal savings to produce a new services that did not sell would add nothing to GDP as no sales were registered and no income received. Job creation will be very weak in June and plans for July look even worse, so there will be very little progress on the jobs front in the coming months. No inflation issue on Main Street and there is nothing the Federal Reserve can do to increase employment. Rates are as low as they have ever been and more reductions will not help, but the promise of more action by the Federal Reserve will keep Wall Street busy and appease Congress.
The economy definitely slowed mid-year, not a huge recession threat but slower than earlier in the year. Job growth will be far short of that needed to reduce the unemployment rate unless lots of unemployed leave the labor force. NFIB members didn’t add a lot of jobs and don’t plan to in the coming months. Capital spending and inventory investment also weakened. Expectations for improvements in sales and business conditions faded, so no reason to hire additional workers or buy new inventory. “Political uncertainty” remained historically high as the reason why the current period is not a good time to expand. All in all, this month’s survey was a real economic downer.
Posted: July 10, 2012 Tuesday 07:45 AM