THE ELECTION, SMALL BUSINESS, AND THE ECONOMY WILLIAM DUNKELBERG CHIEF ECONOMIST, NFIB
TWO WAYS OUT, NEITHER DESIRABLE
JOB GROWTH IN TWO NBER RECOVERY PERIODS, 1983 AND 2009 2009
1983-90
2000
AVERAGE 689,000
1500
AVERAGE 438,000 (535,000)
1000 500 0 -500
1
4
7
13
16
19
22
25
28
QUARTERS OF RECOVERY
-1000
HAVER ANALYTICS -1500
10
GDP GROWTH: “83” 4.5% “09” 2.1%
REAL GDP GROWTH IN NBER EXPANSION PERIODS PERCENT 6
THE WEIGHT OF GOVERNMENT
5 4 3 2 1
20 09
20 02
19 91
19 83
19 80
19 75
19 71
19 61
19 58
0
EXPECTING BETTER ECONOMY UNIVERSITY OF MICHIGAN, 2/17 REPUBLICANS 120 100 I N D E X
V A L U E
80 60 40 20 0
INDEPENDENTS
DEMOCRATS
MOST IMPORTANT PROBLEMS 2016 1. RISING HEALTH CARE COST 2. COST OF REGULATIONS AND RED TAPE 3. FEDERAL TAXES ON BUSINESS INCOME 4. UNCERTAINTY ABOUT THE ECONOMY 5. TAX COMPLEXITY 6. UNCERTAINTY ABOUT GOVT POLICY 7. FREQUENT CHANGES IN THE TAX CODE 8. PROPERTY TAXES 9. STATE TAXES ON BUSINESS INCOME 10. FINDING QUALIFIED LABOR
SMALL BUSINESS FACTS • 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES • 99% HAVE FEWER THAN 500 • PRODUCE HALF OF THE PRIVATE GROSS DOMESTIC PRODUCT • EMPLOY 50%+ OF PRIVATE SECTOR EMPLOYEES • PRODUCE 2/3RDS OF NEW JOBS
SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) FIRST MONTH IN QUARTER
110
MAY JUNE
105 100 95 90 85 80 76
79
82
85
88
91
94
97
'00 '03 '06 '09 12
15
SEASONALLY ADJUSTED INDEX COMPONENTS ANSWERED OCT BEFORE AFTER NOV DEC JAN FEB MAR APR MAY JUN JOB CREATION 10 9 23 15 16 18 15 16 16 18 15 JOB OPENINGS 28 31 30 31 29 31 32 30 33 34 30 EXPECT EASIER CREDIT -6 -4 -5 -5 -6 -6 -3 -3 -4 -4 -3 EXPECT BUS COND BETTER -7 -6 38 12 50 50 48 46 38 39 33 EXPECT HIGHER REAL SALES 1 4 20 11 31 29 26 18 20 22 17 EARNINGS TREND HIGHER -21 -25 -16 -20 -14 -12 -13 -9 -9 -9.9 -10 INVENTORY TOO LOW (NET) -4 -3 -6 -4 -3 -5 -2 -5 -3 -5.5 -3 PLAN TO INCREASE INVENTORY 2 4 4 4 4 2 3 2 3 0.7 3.5 GOOD TIME TO EXPAND 9 11 11 11 23 25 22 22 24 23 21 PLAN CAPITAL SPENDING 27 25 23 24 29 27 26 29 27 28 30 OPTIMISM INDEX
95
95.4 102.4 98 106 106 105 105 105 105 104
EXPECTATIONS FOR BUSINESS CONDITIONS IN 6 MONTHS (PCT “BETTER” - PCT “WORSE”) FIRST MONTH EACH QUARTER
+ MAY JUNE
40 20 0 -20
'1 2 15
'0 6 '0 9
'0 0 '0 3
97
94
91
85
82
79
-40
88
SEASONALLY ADJUSTED
76
Percent of Firms
60
OUTLOOK FOR BUSINESS EXPANSION (PCT “NOW IS A GOOD TIME”)
FIRST MONTH EACH QUARTER
+ MAY JUNE
“NO” for 30 QUARTERS
25 20 15 10 5
(SEASONALLY ADJUSTED)
15
'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
45 40 35 30 25 20 15 10 5 0
+ MAY JUNE
(SEASONALLY ADJUSTED)
16
'1 3
'1 0
'0 7
% OF THOSE SAYING “BAD TIME” '0 4
'0 1
Percent of Firms
QUARTERLY
REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3) FIRST MONTH EACH QUARTER
MAY JUNE
30
RECESSION ENDS
10 0 -10 -20 -30
15
'0 0 '0 3 '0 6 '0 9 '1 2
97
94
91
88
82
79
85
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
-40
76
Percent of Firms
20
EARNINGS TRENDS: %”HIGHER” - %”LOWER” PAST QUARTER VS PRIOR QUARTER FIRST MONTH EACH QUARTER
+ MAY JUNE
-10 -20 -30 -40
15
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-50
76
Percent of Firms
0
CREDIT MARKETS AND INFLATION
17
16
15
14
13
12
11
10
RECEIVABLES BILL PAYMENT TRADE CREDIT 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 FIRST MONTH IN EACH QUARTER+MAY+JUNE -50 -55 -60 NET % WITH A FAVORABLE RESPONSE
'0 9
Percent of Firms
BILL PAYMENT, RECEIVABLES COLLECTION AND TRADE CREDIT
SMALL BUSINESS CREDIT PROBLEMS (% HARDER TO GET - % EASIER)
+ MAY JUNE
30 25 20 15
97 '0 0 '0 3 '0 6 '0 9 '1 2 15
94
91
88
85
82
79
10 5 0 -5
76
Percent of Firms
FIRST MONTH EACH QUARTER
REGULAR BORROWING ACTIVITY (AT LEAST ONCE A QUARTER)
% OF OWNERS
+ MAY JUNE
50 45 40 35 30 25
76 79 82 85 88 91 94 97 '0 0 '0 3 '0 6 '0 9 '1 2 15
Percent of Firms
55
ALL CREDIT NEEDS NOT SATISFIED + MAY JUNE
15 10 5
17
14
'11
'08
'05
'02
99
96
0
93
Percent of Firms
NEEDS NOT MET
LOAN DEMAND: PERCENT NOT WANTING A LOAN PERCENT OF ALL FIRMS NOT WANTING A LOAN
+ MAY JUNE
55
50
45
40
17
14
11
'0 8
'0 5
'0 2
99
96
35
93
Percent of Firms
RECESSION STARTS
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
15
12
'0 6 '0 9
'0 0 '0 3
97
94
91
88
85
82
79
0
76
Percent of Firms
40
AVERAGE RATE PAID ON SHORT TERM LOANS RATE PAID
+ MAY JUNE
25
Percent
20
QUARTERLY
15 10 5 0
81
84
87
90
93
96
99 '02 '05 '08 '11
14
17
NET PERCENT REPORTING HIGHER INTEREST RATES [ ON THE LAST LOAN]
60 40 30 20 10 0 -10 -20 '1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-30 76
Percent of Firms
50
ACTUAL PRICE INCREASES SEASONALLY ADJUSTED 80
FIRST MONTH EACH QUARTER
FIRST MONTH IN EACH QUARTER
40 20
-40
'0 0 '0 3 '0 6 '0 9 '1 2 15
94 97
88 91
-20
82 85
0
76 79
Percent of Firms
60
+ MAY JUNE
CHANGES IN PRICES AND LABOR COMPENSATION COMPENSATION 40
PRICES
SEASONALLY ADJUSTED NET %
20 10
-20 -30
FIRST MONTH IN EACH QUARTER+MAY JUNE
17
14
'1 1
'0 8
'0 5
'0 2
99
96
93
90
-10
87
0 84
Percent of Firms
30
EMPLOYMENT AND JOB CREATION
UNFILLED JOB OPENINGS % WITH AT LEAST ONE UNFILLED OPENING FIRST MONTH EACH QUARTER
MAY JUNE
40
Percent of Firms
35 30 25 20 15 10
15 17
12
'0 6 '0 9
'0 0 '0 3
97
94
91
88
85
82
79
76
5
C IF IC W O R SK K IL H SO LS I S C IA TO R L SK Y IL L W LE S A G GA E EX L EN PE A G/M C PP EA AT R H A N A TT C E IT U D D E R U G S
SP E
TYPICAL REASONS APPLICANT “NOT QUALIFIED” 2007 2017
30
25
20
15
10
5
0
JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE FIRST MONTH EACH QUARTER
MAY JUNE
25
15 10 5 0 -5
15 17
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-10 76
Percent of Firms
20
MOST IMPORTANT PROBLEMS LABOR COST LABOR QUALITY FIRST MONTH IN EACH QUARTER + MAY JUNE
20 15 10 5
15
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0 76
Percent of Firms
25
AVERAGE CHANGE IN EMPLOYMENT PER FIRM FIRST MONTH EACH QUARTER
MAY JUNE
0
-0.4
-0.8
14 17
'0 8 11
'0 2 '0 5
96 99
90 93
84 87
-1.2
78 81
NUMBER OF WORKERS
0.4
NET PERCENT OF OWNERS INCREASING EMPLOYMENT FIRST MONTH EACH QUARTER
MAY JUNE
15
5 0 -5 -10 -15 -20
SEASONALLY ADJUSTED
15
'0 9 '1 2
'0 0 '0 3 '0 6
97
94
91
88
85
82
-25
79
Percent of Firms
10
PREDICTED AND ACTUAL UNEMPLOYMENT RATE ACTUAL
10 8 6
15
'12
'09
'06
'03
97 '00
94
91
88
85
82
79
4
76
Percent of Firms
PREDICTED
PERCENT OF OWNERS INCREASING OR REDUCING EMPLOYMENT INCREASED
30
REDUCED
FIRST MONTH IN EACH QUARTER+MAY+JUNE
20 15 10 5
97 '0 0 '0 3 '0 6 '0 9 '1 2 15
94
91
88
85
82
0
79
Percent of Firms
25
CAPITAL EXPENDITURES AND INVENTORY INVESTMENT
ACTUAL CAPITAL OUTLAYS % SPENDING
75
%SPEND + LEASE
+ MAY JUNE
LEASING ADDED 65 60 55 50
FIRST MONTH IN EACH QUARTER
45
15
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
40
82
Percent of Firms
70
PLANNED CAPITAL OUTLAYS (NEXT SIX MONTHS) FIRST MONTH EACH QUARTER
+ MAY JUNE
45
35 30 25 20
'1 2 15
'0 6 '0 9
'0 0 '0 3
94 97
88 91
82 85
15
76 79
Percent of Firms
40
INVENTORY INVESTMENT PLANS [% PLAN INCREASE – % PLAN DECREASE]
FIRST MONTH EACH QUARTER
+ MAY JUNE
10 5 0 -5 -10 -15
'1 2 15
'0 6 '0 9
'0 0 '0 3
97
94
91
88
85
82
79
SEASONALLY ADJUSTED
76
Percent of Firms
15
THE DEBT DEATH SPIRAL
“EXCESS” CONSUMER DEBT: PAYING FOR THE “PARTY” DEBT=.8*DISPOSABLE INCOME 16000 14000
ACTUAL
MAINTAINING DEBT/INCOME RATIO IN 1999
12000 ($000)
10000 8000 6000 4000 2000 0
Federal Reserve/Haver Analytics
90
93
96
99
'02
'05
'08
'11
'14
CONSUMER NET WORTH NET WORTH
80
BELIEVABLE???
HOUSING
60
DOT COM 40 20 0
Federal Reserve/Haver Analytics
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '0 0 '0 2 '0 4 '0 6 '0 8 10 12 14
TRILLIONS OF DOLLARS
100
5
NET WORTH PER DOLLAR OF GDP
BUBBLE????
BUBBLE 4.5
BUBBLE 4
AVERAGE 1970-1994
3.5
3
RECESSION Federal Reserve/Haver Analytics
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '0 0 '0 2 '0 4 '0 6 '0 8 10 12 14 16
RATIO OF WEALTH TO GDP
CONSUMER NET WORTH RELATIVE TO GDP
STOCKS AND BONDS BOND INDEX (left)
S&P STOCKS (right)
140
2500
120
2000
100 1500
80 60
1000
40 500
20
HAVER ANALYTICS
0
0 90
95
'00
'05
'10
'15
SOME THINGS THE ELECTION HAS TAUGHT US
THE DEMOCRATS SWINGING FOR THE FENCE TOOK THEIR EYE OFF THE BALL
56
TRICKLE DOWN
ALWAYS FIND WAYS TO MAKE YOUR JOB INTERESTING