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NFIB Small Business Optimism Index fell 1.3 points to 93.9
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The Index of Small Business Optimism fell 1.3 points from December, falling to 93.9. Neither the tumultuous stock market nor the Federal Reserve’s rate hike left much of a mark on small business owners beyond a frown in the Index represented by a further weakening of expectations for business conditions and expected real sales volumes. Those two Index components accounted for most of the decline.
The Bureau of Economic Analysis reported its first estimate of real GDP growth in 2015 Q4 at 0.7 percent, a very weak performance. The Bureau of Labor Statistics reported job creation in January at about 150,000. December’s number was revised down to 262,000, still more than most analysts, including those with independent data sources. So what are all those workers making? It’s not showing up in GDP. The unemployment rate fell to 4.9 percent but the percent of the adult population with a job remained historically low. The State of the Union address tried to put lipstick on the pig that is our recovery and of course shift the blame for the recession to predecessors. There was little there to lift the spirits of Main Street business owners. The litany was old and worn.
The Small Business Optimism Index fell a bit more than one point, not much of a response to stock market turbulence or the Federal Reserve’s move to raise interest rates. The decline in optimism was accounted for by two important Index components, expected business conditions in six months and expected real sales. These expectations are important determinants of decisions to hire, to expand business operations and to order new inventory, all drivers of economic growth. Fed policy provides liquidity and depresses interest rates but provides no encouragement to owners to spend and produce some “inflation”. Indeed, policy pronouncements convey a sense of desperation which is not supportive of positive expectations for the economy.
The labor market continues to show strength, driven by the core growth in the economy that results from the addition of 3 million new people every year (a missing ingredient to the growth stew in Japan and Western Europe). But uncertainty continues to cloud the future. Politicians are promising “free stuff” but that means less freedom to Main Street that will be expected to pay for it. There is talk of “negative interest rates”, a very foreign and confusing concept to Main Street. Global events are not encouraging, indicative of more confusion and violence to come. The Administration offers little promise that serious economic problems will be dealt with while the avalanche of regulations continues. Overall, it is unlikely that anything will occur that will raise the spirits of small business owners and rekindle the “animal spirits” that are needed to spur economic growth.
Posted: February 9, 2016 Tuesday 07:00 AM