Download - Small Business and the Global Economy
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DR. WILLIAM DUNKELBERG
Chief Economist
NATIONAL FEDERATION
OF INDEPENDENT BUSINESS
CHAIRMAN, LIBERTY
BELL BANK, NEW JERSEY
CHAIR, GLOBAL
INTERDEPENDENCE CENTER
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TWO WAYS OUT, NEITHER DESIRABLE
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THE 99 PERCENT
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GDP AND EMPLOYMENT
7000
8000
9000
10000
11000
12000
13000
14000
'00 '03 '06 '09 '12
130000
132000
134000
136000
138000
140000
142000
144000
146000
148000
GDP2005$(left) EMPLOYMENT(right)
HUGE EMPLOYMENT GAP
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HOUSING STARTS
500
800
1100
1400
1700
2000
91 93 95 97 99 '01 '03 '05 '07 '09 '11
UNITS
UN
ITS
000
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HOME OWNERSHIP RATES
60
62
64
66
68
70
80 83 86 89 92 95 98 '01 '04
Perc
ent
USA
BARNEY’S “UNAFFORDABLE” HOUSING
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CONSUMPTION SHARE OF
GDP & CONSUMER SAVING
58
60
62
64
66
68
70
72
78 83 88 93 98 '03
'08
0
2
4
6
8
10
12
14
CONSUMPTION SPENDING SAVING RATE
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0
2000
4000
6000
8000
10000
12000
14000
16000
90 93 96 99 '02 '05 '08 '11
(00
0)
DEBT=.7GDP ACTUAL
“EXCESS” DEBT: PAYING FOR
THE “PARTY”
MAINTAINING DEBT/GDP RATIO IN 1999
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TRADE DEFICIT
-800
-700
-600
-500
-400
-300
-200
-100
0
78 83 88 93 98 '03
'08
Source: BEA
BIL
LIO
NS
OF
CO
NS
TA
NT
DO
LL
AR
S
THE PARTY
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INDEX OF CONSUMER
SENTIMENT
50
60
70
80
90
100
110
78 83 88 93 98 '03
'08
Source: University of Michigan
Ind
ex
Valu
e
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RATING OF GOVERNMENT POLICY
-50
-40
-30
-20
-10
0
10
20
30
40
50
'00
'03
'06
'09
'12
Source: University of Michigan
Perc
en
t o
f C
on
su
mers
NET % POLICIES ARE GOOD 2008-12
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HOUSE PRICES
0
50
100
150
200
250
87 90 93 96 99 '02
'05
'08
'11
Pe
rce
nt
FHFA CASE SHILLER
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CONSUMER NET WORTH
05
10152025303540455055606570
78 80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 '08 '10
TR
ILL
ION
S O
F D
OL
LA
RS
NET WORTH
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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
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SMALL BUSINESS
OPTIMISM INDEX (QUARTERLY, 1986 = 100)
80
85
90
95
100
105
110
76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12
SEASONALLY ADJUSTED MAY JUNE
FIRST MONTH IN EACH QUARTER
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SMALL BUSINESS
OPTIMISM INDEX (RECOVERY FROM NBER TROUGH)
80
85
90
95
100
105
110
2009:Q2 2001:Q4 1991:Q1 1982:Q4 1975:Q1
SURVEY FIRST MONTH IN EACH QUARTER
MAY JUNE
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EXPECTATIONS FOR GENERAL
BUSINESS CONDITIONS
IN 6 MONTHS (PCT “BETTER” - PCT “WORSE”)
-50
-30
-10
10
30
50
70
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
SEASONALLY ADJUSTED
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OUTLOOK FOR BUSINESS
EXPANSION (PCT “NOW IS A GOOD TIME”)
0
5
10
15
20
25
30
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
(SEASONALLY ADJUSTED)
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
“NO” FOR 18 QUARTERS
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BAD TIME TO EXPAND DUE TO THE POLITICAL CLIMATE
0
5
10
15
20
25
30
'01
'04
'07
'10
(SEASONALLY ADJUSTED)
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
% OF THOSE SAYING “BAD TIME”
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REPORTED CHANGE IN PAST
SALES (last 3 months vs prior 3)
-40
-30
-20
-10
0
10
20
30
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
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EXPECTED REAL SALES
-30
-20
-10
0
10
20
30
40
50
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
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ACTUAL PRICE INCREASES SEASONALLY ADJUSTED
-40
-20
0
20
40
60
80
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
Perc
en
t o
f F
irm
s
RAISED (NET) MAY JUNE
FIRST MONTH IN EACH QUARTER
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EMPLOYMENT
3000
8000
13000
18000
23000
28000
75 80 85 90 95 '00
'05
'10
Em
plo
ym
en
t
CONSTRUCTION MANUFACTURINGRETAIL PROF/BUS SERVICESGOVERNMENT
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AVERAGE CHANGE IN EMPLOYMENT
PER FIRM
-1.2
-0.8
-0.4
0
0.4
79 82 85 88 91 94 97 '00
'03
'06
'09
'12
NU
MB
ER
OF
WO
RK
ER
S
WORKERS PER FIRM MAY JUNE
QUARTERLY: FIRST MONTH IN EACH QUARTER
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JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE
-10
-5
0
5
10
15
20
25
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
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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
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40
45
50
55
60
65
70
75
82 85 88 91 94 97 '00
'03
'06
'09
'12
Perc
en
t o
f F
irm
s
% SPENDING %SPEND + LEASE
ACTUAL CAPITAL OUTLAYS
FIRST MONTH IN EACH QUARTER+MAY JUNE
LEASING ADDED
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PLANNED CAPITAL OUTLAYS
(NEXT SIX MONTHS)
15
20
25
30
35
40
45
77 80 83 86 89 92 95 98 '01
'04
'07
'10
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
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MOST IMPORTANT PROBLEMS
0
5
10
15
20
25
30
35
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
Perc
en
t o
f F
irm
s
TAXES REGULATIONS WEAK SALES INSURANCE
FIRST MONTH IN EACH QUARTER+MAY JUNE
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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
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SMALL BUSINESS
CREDIT PROBLEMS (% HARDER TO GET - % EASIER)
-5
0
5
10
15
20
25
30
74 77 80 83 86 89 92 95 98 '01
'04
'07
'10
'13
Perc
en
t o
f F
irm
s
QUARTERLY MAY JUNE
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LOAN DEMANDS WEAKEN THROUGH
THE RECESSION
35
40
45
50
55
93 96 99 '02
'05
'08
'11
Perc
en
t o
f F
irm
s
PERCENT OF ALL FIRMS NOT WANTING A LOAN MAY JUNE
RECESSION STARTS
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SINGLE MOST IMPORTANT
PROBLEM FACING OWNERS
0
5
10
15
20
25
30
35
40
45
76 79 82 85 88 91 94 97 '00
'03
'06
'09
'12
Perc
en
t o
f F
irm
s
INFLATION CREDIT
FIRST MONTH IN EACH QUARTER+MAY JUNE
CREDIT: NO PROBLEM
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Deposit $100 REQUIRED
RESERVE $10
ASSETS LIABILITIES
CASH $10 Deposit $100
ASSETS LIABILITIES
BANK BANK
EXCESS
RESERVE $90
LOAN $90
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TS
LF
-3/1
1/0
8, 9
50
"TD
WP
-8
/1
7/0
7"
TA
F-1
2/1
2/0
7
PD
CF
-3/1
6/0
8
Se
ries B
rea
k
Se
ries B
rea
k
$450
$600
$750
$900
$1,050
$1,200
$1,350
$1,500
$1,650
$1,800
$1,950
$2,100
$2,250
$2,400
$2,550
$2,700
$2,850
$3,000
27
-Ju
n-0
7
8-A
ug
-07
28
-No
v-0
7
9-J
an
-08
20
-Fe
b-0
8
2-A
pr-0
8
24
-Se
p-0
8
5-N
ov-0
8
17
-De
c-0
8
28
-Ja
n-0
9
11
-Ma
r-09
20
09
-04
-22
20
09
-06
-03
20
09
-07
-15
20
09
-08
-26
20
09
-10
-07
18
-No
v-0
9
30
-De
c-0
9
10
-Fe
b-1
0
24
-Ma
r-10
5-M
ay-1
0
16
-Ju
n-1
0
28
-Ju
l-10
8-S
ep
-10
20
-Oct-1
0
1-D
ec-1
0
12
-Ja
n-1
1
23
-Fe
b-1
1
6-A
pr-1
1
18
-Ma
y-1
1
29
-Ju
n-1
1
10
-Au
g-1
1
21
-Se
p-1
1
2-N
ov-1
1
14
-De
c-1
1
25
-Ja
n-1
2
Factors Using Reserves on Federal Reserve's Balance Sheet (Liabilities)
from 6/27/2007 to 2/15/2012
Reserve Balances
Other Liabilities and Capital
Deposits - Not Reserve
Balances
Treasury Cash Holdings
Reverse-RPs with Dealers
Reverse RPs: Foreign
Official and International
AccountsCurrency in Circulation
TSLF-3/11/08
"TDWP - 8/17/07"
TAF-12/12/07
Billions
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AVERAGE RATE PAID ON
SHORT TERM LOANS
0
5
10
15
20
25
81 84 87 90 93 96 99 '02
'05
'08
'11
Perc
en
t o
f F
irm
s
RATE PAID 1 YR TREASURY
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RATIO OF GOVERNMENT
SPENDING TO GDP
25
30
35
40
78 83 88 93 98 '03
'08
Source: BEA
PE
RC
EN
T
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U.S. Federal Deficit
-1500
-1000
-500
0
500
78 81 84 87 90 93 96 99 '02
'05
'08
CROWDING OUT?
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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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TRICKLE DOWN
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