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NFIB Small Business Optimism Index increased by 0.2 points to 94.1
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The Small Business Optimism Index increased by 0.2 points to 94.1. Only three of the Index components improved, two were unchanged, and five were lower indicating that the small business half of the economy was still adding little to growth beyond that needed to support population growth. Technically, January marks the third monthly increases in a row, but unfortunately, each monthly increase is lower than the last. But while improvements are losing steam, the increase still beats a decline.
Last year finished with a fair uptick in economic activity, but probably not as strong as the “headline” GDP numbers made it look. Overall, GDP was up only 1.9 percent in 2013, down from 2.8 percent in 2012. But the second half of the year posted above trend growth numbers, a rare showing in our 5 year recovery. Exports were strong, that’s good for manufacturing output, but less so for jobs – productivity looking good. A huge share of the growth was in inventory building, nice while it is happening, but usually followed by sub-normal production later as excess stocks are worked off. That will depress activity in the first half of 2014 and keep some prices down.
Employment starts 2014 over a million below its peak in January 2008 and prospects for a major recovery in jobs are not good. Missing from the jobs numbers and GDP are construction workers. While housing starts have been improving, it has been at a very slow pace, leaving starts a half a million below what was thought to be trend, though some starts are “bigger” than others, multifamily starts absorb a lot of households per start. NFIB labor market indicators have recently seen a return to normal but not expansion levels, encouraging in that reversals are now less likely. The average increase in workers per firm has risen in recent quarters, indicating new job creation. However, there are far fewer firms hiring workers than there were in 2007 and many of those still in existence have downsized.
Tapering has started, but the impact on owners’ views about loan markets has not been impacted, nor was it when QE was started. Low rates are nice, but one must repay a loan which means the loan proceeds must be productively deployed and opportunities to do so in this recovery have been scarce for small businesses. Nearly two-thirds of owners continue to express no interest in a loan and historically low percentages complain about lack of access. QE didn’t have much of an impact on jobs and tapering probably will not either, it’s a “big bank” event, trading the yield curve, not making business loans.
As noted last time, economic policy will be dominated by vote getting, not sensible strategies to improve economic growth and job creation, to wit, with a 20 percent teen unemployment rate, liberal policy makers want to raise the minimum wage. This will, barring a surge in economic activity that raises the values of these workers, undoubtedly worsen unemployment and job opportunities in the future
Posted: February 11, 2014 Tuesday 07:30 AM