U.S. ECONOMIC GROWTH AND ITS ENTREPRENEURIAL SECTOR BILL DUNKELBERG CHIEF ECONOMIST NATIONAL FEDERATION OF INDEPENDENT BUSINESS PROFESSOR OF ECONOMICS, TEMPLE UNIVERSITY CHAIR, GLOBAL INTERDEPENDENCE CENTER CHAIRMAN OF THE BOARD, LIBERTY BELL BANK
ECONOMIC GROWTH • LABOR GROWTH, QUALITY • CAPITAL WIDENING AND DEEPENING • PRODUCTIVITY – HOW WELL IS CAPITAL USED, LABOR REALLOCATED TO BEST USE, RETRAINED FOR NEW JOBS • SMALL BUSINESS AT THE CORE OF THIS GROWTH
PERCENTAGE CHANGE IN REAL GDP 20 15 10 5 0 -5 -10
76 79 82 85 88 91 94 97 '00 '03 '06
HOME OWNERSHIP RATES 70
66
64
62
'0 4
'0 1
9 8
9 5
9 2
8 9
8 6
8 3
60 8 0
Percent
68
RESIDENTIAL VACANCY RATES 10 8 6 4 2 VACANCY RATES
0
86
91
96
'01
ENTREPRENEURIAL FACTS • 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES • 98% HAVE FEWER THAN 500 • PRODUCE HALF OF THE PRIVATE SECTOR GROSS DOMESTIC PRODUCT • EMPLOY 60% OF PRIVATE SECTOR EMPLOYEES • PRODUCE 2/3RDS OF THE NEW JOBS
THE UNEMPLOYMENT RATE ACTUAL
6.5
PREDICTED
6
Percent
5.5 5 4.5 4 FOURTH QUARTER FORECAST
3.5 3
95
98
'01
'04
'07
66
RATIO OF # EMPLOYED TO POPULATION AGE 16 YEARS +
64 62 60 58
10% + UNEMPLOYMENT
56
'0 6
'0 5
95
85
75
65
54
JOB CREATION BY FIRM SIZE 2000:1 - 2001:1 (000) 1200
1,111,183
1000 800 600 400
39,692
200
-150,905
0 -200
UNDER 20
20-499
500+ EMPLOYEES
IMMIGRATION STATISTICS FOREIGN BORN POPULATION (MM) % FOREIGN BORN LEGAL IMMIGRATION PER 1000 POPULATION 35 30 25 20 15 10 5 0
1850
1870
1890
1910
1930
1950
1970
1990
2010
IMMIGRATION • NUMBER OF ILLEGALS LOWERED BY AMNESTY OF 1987-88 • 300,000 + ILLEGAL ENTRANTS PER YEAR • HALF ENTER LEGALLY AND OVERSTAY • CONCENTRATED IN YOUNG LABOR FORCE GROUP • GROWING % OF SCIENTIFIC PROFESSIONALS • FIRST AND SECOND GENERATION IMMIGRANT CHILDREN DO EXCEPTIONALLY WELL IN SCHOOL • 200,000 PEOPLE LEAVE THE U.S. EACH YEAR • ILLEGAL IMMIGRANT FLOWS DEPEND ON ECONOMIES IN THE SOURCE COUNTRIES
SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) SEASONALLY ADJUSTED
MONTHLY APR-AUG
QUARTERLY
110 105 100 95 90 85
GREEN DOTS=APR,JUL,OCT QUARTERLY
80 76
79
82
85
88
91
94
97
'00
'03
'06
UNFILLED JOB OPENINGS % WITH AT LEAST ONE UNFILLED OPENING QUARTERLY
MONTHLY, APR-NOV
40
30 25 20 15 10 5
06
03
00
97
94
91
88
85
82
79
0 76
Percent of Firms
35
JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE QUARTERLY
MONTHLY, APR-NOV
25
15 10 5 0 -5
06
03
00
97
94
91
88
85
82
79
-10 76
Percent of Firms
20
PRODUCTIVITY (OUTPUT PER HOUR) OUTPUT PER HOUR (1992=100)
MFG OUTPUT PER HOUR
200
INDEX
150
100
50
0 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
TRADE
EDUCATION IS ONE OF OUR LARGEST EXPORTS (MOST RETURN HOME) US WORKERS SEND MONEY TO THEIR HOME COUNTRIES IMPORTS = HIRING FOREIGN LABOR TO PRODUCE IN THEIR COUNTRIES RATHER THAN MOVING HERE “OUTSOURCING” IS OFTEN A “NEW” JOB, NOT THE LOSS OF A DOMESTIC JOB
U.S. TRADE DEFICIT EXPORTS-IMPORTS [CONSTANT DOLLARS] 100 0 -200 -300 -400 -500 -600
TALK ABOUT OUTSOURCING!!
-700
5 '0
2 '0
99
96
93
90
87
84
81
-800 78
Billions of Dollars
-100
MOST IMPORTANT PROBLEMS LABOR COST
LABOR QUALITY
20
FIRST MONTH IN EACH QUARTER: + NOV 15 10 5
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0 76
Percent of Firms
25
MOST IMPORTANT PROBLEMS INFLATION
45
FIRST MONTH IN EACH QUARTER: + NOV
35 30 25
CENTRAL BANK MUST CONTROL INFLATION AND CREDIT DEMAND
20 15 10 5
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent of Firms
40
CREDIT
SMALL BUSINESS CREDIT PROBLEMS (% HARDER TO GET - % EASIER)
QUARTERLY
MONTHLY, APR-NOV
25 20 15 10 5 0
'0 4
'0 2
98
95
92
89
86
83
80
77
-5
74
Percent of Firms
30
INFLATION: CONSUMER PRICE INDEX PREDICTED BY NFIB SURVEY
Percent
18 16 14 12 10 8 6 4 2 0 -2 -4
PREDICTED
ACTUAL
NFIB Q3 FORECAST 4.7%
CORE CPI INFLATION PREDICTED BY NFIB SURVEY PREDICTED
16
ACTUAL
14 12 8 6 4 2
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent
10
INDEX OF CONSUMER SENTIMENT
110
Index Value
100 90 80 70 60 50 78
80 82 84 86 88 90 92 Source: University of Michigan
94
96
98
'00 '02 '04 '06
STOCK MARKET S&P
NYSE
NASDQ
9000 8000 7000 6000 5000 4000 3000 2000 1000
'0 3
'0 0
97
94
91
88
85
82
79
76
73
70
0
INTEREST RATES 16
2 YEAR
10 YEAR
FED FUNDS
14 12 10 8 6 4 2
'0 5
'0 0
95
90
85
80
0