DR. WILLIAM DUNKELBERG Chief Economist NATIONAL FEDERATION OF INDEPENDENT BUSINESS
CHAIRMAN, LIBERTY BELL BANK, NEW JERSEY CHAIR, GLOBAL INTERDEPENDENCE CENTER
TWO WAYS OUT, NEITHER DESIRABLE
THE 99 PERCENT
GDP AND EMPLOYMENT GDP2005$(left)
EMPLOYMENT(right)
14000
148000 146000
13000
144000 12000
142000
11000
140000
10000
138000 136000
9000
HUGE EMPLOYMENT GAP
134000
8000
132000
7000
130000 '00
'03
'06
'09
'12
HOUSING STARTS UNITS 2000
UNITS 000
1700 1400 1100 800 500 91
93
95
97
99
'01
'03
'05
'07
'09
'11
HOME OWNERSHIP RATES USA
70
BARNEY’S “UNAFFORDABLE” HOUSING 68
Percent
66
64
62
4 '0
1 '0
9 8
9 5
9 2
8 9
8 6
8 3
8 0
60
CONSUMPTION SHARE OF GDP & CONSUMER SAVING CONSUMPTION SPENDING
SAVING RATE
8
64
6
62
4
60
2
58
0 '0 8
66
'0 3
10
98
68
93
12
88
70
83
14
78
72
“EXCESS” DEBT: PAYING FOR THE “PARTY” DEBT=.7GDP 16000 14000
ACTUAL
MAINTAINING DEBT/GDP RATIO IN 1999
12000 (000)
10000 8000 6000 4000 2000 0
90
93
96
99
'02
'05
'08
'11
TRADE DEFICIT -100 -200 -300
THE PARTY
-400 -500 -600 -700
Source: BEA
'0 8
'0 3
98
93
88
83
-800
78
BILLIONS OF CONSTANT DOLLARS
0
110
INDEX OF CONSUMER SENTIMENT
90 80 70 60
Source: University of Michigan
'0 8
'0 3
98
93
88
83
50
78
Index Value
100
Source: University of Michigan
2008-12
'1 2
'0 9
'0 6
NET % POLICIES ARE GOOD
'0 3
50 40 30 20 10 0 -10 -20 -30 -40 -50
'0 0
Percent of Consumers
RATING OF GOVERNMENT POLICY
HOUSE PRICES FHFA
CASE SHILLER
250
150 100 50
'11
'08
'05
'02
99
96
93
90
0
87
Percent
200
CONSUMER NET WORTH
TRILLIONS OF DOLLARS
NET WORTH 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 78 80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 '08 '10
SMALL BUSINESS FACTS • 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES • 99% HAVE FEWER THAN 500 • PRODUCE HALF OF THE PRIVATE SECTOR GROSS DOMESTIC PRODUCT • EMPLOY 50%+ OF PRIVATE SECTOR EMPLOYEES • PRODUCE 2/3RDS OF THE NEW JOBS
SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) SEASONALLY ADJUSTED
MAY JUNE
110 105 100 95 90 85
FIRST MONTH IN EACH QUARTER
80
76
79
82
85
88
91
94
97
'00
'03
'06
'09
'12
SMALL BUSINESS OPTIMISM INDEX (RECOVERY FROM NBER TROUGH) 2009:Q2
2001:Q4
1991:Q1
1982:Q4
1975:Q1
110 105 100 95 MAY
90 85 SURVEY FIRST MONTH IN EACH QUARTER
80
JUNE
EXPECTATIONS FOR GENERAL BUSINESS CONDITIONS IN 6 MONTHS (PCT “BETTER” - PCT “WORSE”) QUARTERLY
MAY JUNE
50 30 10 -10 -30
SEASONALLY ADJUSTED
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-50
76
Percent of Firms
70
OUTLOOK FOR BUSINESS EXPANSION (PCT “NOW IS A GOOD TIME”) QUARTERLY
MAY JUNE
“NO” FOR 18 QUARTERS
25 20 15 10 5
(SEASONALLY ADJUSTED)
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent of Firms
30
BAD TIME TO EXPAND DUE TO THE POLITICAL CLIMATE QUARTERLY
MAY JUNE
25 20 15 10 5
(SEASONALLY ADJUSTED)
'1 0
'0 4
'0 7
% OF THOSE SAYING “BAD TIME”
0
'0 1
Percent of Firms
30
REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3) QUARTERLY
MAY JUNE
30
10 0 -10 -20 -30
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-40
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
76
Percent of Firms
20
EXPECTED REAL SALES QUARTERLY
MAY JUNE
50
30 20 10 0 -10 -20
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
82
79
-30
85
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
76
Percent of Firms
40
ACTUAL PRICE INCREASES SEASONALLY ADJUSTED RAISED (NET)
80
FIRST MONTH IN EACH QUARTER
40 20
-40
'1 2
'0 9
'0 6
'0 3
'0 0
94 97
88 91
-20
82 85
0
76 79
Percent of Firms
60
MAY JUNE
EMPLOYMENT CONSTRUCTION RETAIL GOVERNMENT
MANUFACTURING PROF/BUS SERVICES
28000
18000 13000 8000
'1 0
'0 5
'0 0
95
90
85
80
3000
75
Employment
23000
AVERAGE CHANGE IN EMPLOYMENT PER FIRM WORKERS PER FIRM
MAY JUNE
0
-0.4
-0.8 QUARTERLY: FIRST MONTH IN EACH QUARTER
'0 0 '0 3 '0 6 '0 9 '1 2
97
94
91
88
85
82
-1.2
79
NUMBER OF WORKERS
0.4
JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE QUARTERLY
MAY JUNE
25
15 10 5 0 -5
12
09
06
03
00
97
94
91
88
85
82
79
-10 76
Percent of Firms
20
REAL INVESTMENT • CREATION OF REAL PRODUCTIVE ASSETS – MAINTENANCE MODE • SOLD OFF EXCESS INVENTORY, NEW ORDERS WEAK • FIRE SALE IS OVER, SATISFIED WITH CURRENT STOCKS • HOUSING: NO HELP FOR PRODUCTIVITY
ACTUAL CAPITAL OUTLAYS % SPENDING
75
%SPEND + LEASE
LEASING ADDED
65 60 55 50 45
FIRST MONTH IN EACH QUARTER+MAY JUNE
2 '1
9 '0
6 '0
3 '0
0 '0
97
94
91
88
85
40
82
Percent of Firms
70
PLANNED CAPITAL OUTLAYS (NEXT SIX MONTHS) QUARTERLY
MAY JUNE
40 35 30 25 20
'0 1 '0 4 '0 7 '1 0
98
95
92
89
86
83
80
15
77
Percent of Firms
45
MOST IMPORTANT PROBLEMS 35
TAXES
REGULATIONS
WEAK SALES
INSURANCE
FIRST MONTH IN EACH QUARTER+MAY JUNE 25 20 15 10 5
94 97 '0 0 '0 3 '0 6 '0 9 '1 2
88 91
82 85
0
76 79
Percent of Firms
30
CREDIT • FEW USES FOR LOANS • PRIVATE LOAN DEMAND WEAK, GOVERNMENT DEMAND STRONG • LOTS OF UNCERTAINTY: RETURNS • PLANNING HORIZONS LONGER THAN 6 MONTHS • TOO MUCH “TEMPORARY” STUFF
SMALL BUSINESS CREDIT PROBLEMS (% HARDER TO GET - % EASIER) MAY JUNE
30 25 20 15
3 '1
0 '1
7 '0
4 '0
1 '0
98
95
92
89
86
83
80
77
10 5 0 -5
74
Percent of Firms
QUARTERLY
LOAN DEMANDS WEAKEN THROUGH THE RECESSION PERCENT OF ALL FIRMS NOT WANTING A LOAN RECESSION STARTS
50
45 40
'1 1
'0 8
'0 5
'0 2
99
96
35
93
Percent of Firms
55
MAY JUNE
SINGLE MOST IMPORTANT PROBLEM FACING OWNERS INFLATION
CREDIT
45
35 30
FIRST MONTH IN EACH QUARTER+MAY JUNE
25 20 15
CREDIT: NO PROBLEM
10 5
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent of Firms
40
BANK
BANK ASSETS
LIABILITIES
REQUIRED RESERVE $10
Deposit $100
EXCESS RESERVE $90
ASSETS CASH
$10
LOAN $90
LIABILITIES Deposit $100
Factors Using Reserves on Federal Reserve's Balance Sheet (Liabilities) from 6/27/2007 to 2/15/2012
$3,000 $2,850
Reserve Balances
$2,700 Other Liabilities and Capital
$2,550 $2,400 $2,250
Deposits - Not Reserve Balances
$2,100
Treasury Cash Holdings
$1,950 Reverse-RPs with Dealers
$1,500 $1,350 $1,200 $1,050
Series Break PDCF-3/16/08 TSLF-3/11/08, 950
$1,650
TAF-12/12/07 Series Break "TDWP - 8/17/07"
Billions
$1,800
Reverse RPs: Foreign Official and International Accounts Currency in Circulation TSLF-3/11/08
$900 "TDWP - 8/17/07"
$750 $600
TAF-12/12/07
25-Jan-12 14-Dec-11 2-Nov-11 21-Sep-11 10-Aug-11 29-Jun-11 18-May-11 6-Apr-11 23-Feb-11 12-Jan-11 1-Dec-10 20-Oct-10 8-Sep-10 28-Jul-10 16-Jun-10 5-May-10 24-Mar-10 10-Feb-10 30-Dec-09 18-Nov-09 2009-10-07 2009-08-26 2009-07-15 2009-06-03 2009-04-22 11-Mar-09 28-Jan-09 17-Dec-08 5-Nov-08 24-Sep-08 2-Apr-08 20-Feb-08 9-Jan-08 28-Nov-07 8-Aug-07 27-Jun-07
$450
AVERAGE RATE PAID ON SHORT TERM LOANS RATE PAID
1 YR TREASURY
20 15 10 5
1 '1
8 '0
5 '0
2 '0
99
96
93
90
87
84
0
81
Percent of Firms
25
35
30
Source: BEA
'0 8
'0 3
98
93
88
83
25
78
PERCENT
40
RATIO OF GOVERNMENT SPENDING TO GDP
U.S. Federal Deficit 500
0
-500
CROWDING OUT? -1000
'0 8
'0 5
'0 2
99
96
93
90
87
84
81
78
-1500
SO, WHERE ARE WE? • • • •
ECONOMIC GROWTH SLOW UNEMPLOYMENT HIGH SMALL BUSINESS, HALF OF GDP, STALLED MOST IMPORTANT PROBLEMS? – – – –
HEALTH CARE COST, TOP FOR 25 YEARS UNCERTAINTY ABOUT THE ECONOMY #2 UNCERTAINTY ABOUT GOVERNMENT POLICY #4 ADMINISTRATIVE LAW, EPA, HHS REGS ETC
• CHALLENGES ARE LOCAL, NATIONAL, GLOBAL
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