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Tuesday, October 11, 2011

NFIB October - The Buck Stops Here

Small businesses do seem to be the center of job creation right now. But this is not a very healthy mule, and I can't see it taking us very far:


Here's the full report. Note the minor blip up for this month. Note also that this only takes us to about a severe recession low, and the long, grim fall that preceded that nice little blip. Employment was a bit disappointing - over the summer it had moved up to -2, and in this report it fell to -5. On page 16 you can see the reported interest rates for regular borrowers. Small businesses aren't seeing any benefit from lower interest rates. Over the last couple of months, average rates have ticked up rather than down.

Finally, let me post this snippet from page 7. This series is one of the reasons that I have been such a woebegone, worried blogger of late:


I have always found this series to be a pretty good indicator of economic gates - times when the overall economy hits a diffusion point.

Look at Nov/Dec of 2007, and the huge change between March and May of 2009. According to this series, by July we had shifted into the "ice-cracking" recession wave.

Every "ground-level" indicator that I know of says that we are in a recession now. We probably entered it in April, definitely by June, and the question is when do we get out?

I am rather unhappy right now, and I have to lick my wounds a bit. I expected the "-22" in the above chart for September to be more along the lines of "-17", so I'm twitching and angsty. The next NFIB survey is the "big" sample, so maybe it will show up then.

Supermarkets are terrible, radio advertising is extremely worrisome, service consumer businesses are in trouble - and oh, yeah, consumer credit is definitely not bailing us out. H.8 chart:


Light vehicle sales were pretty good, but it isn't showing up here.

Comments:
A bit OT, but I wanted to get your take on the issue of the European crisis since it seems to be affecting both markets and confidence here.

Forbes has an article up by Nathan Lewis that seems to me to make a lot of sense. On the other hand, maybe he doesn't see the size of the problem. Anyway, it's here:
http://www.forbes.com/forbes/2011/1024/opinions-nathan-lewis-capital-flows-europe-crisis-economic.html

In the same issue, Gary Shilling opines that the Fed's "Operation Twist" indicates that the Fed expects more deflation. Shilling has been advocating treasuries as the place to be for some time. He sees China making a hard landing with subsequent less demand for commodities of all types.(More deflationary pressures.) May well be true. We'll see. Seems like the China thing is unfolding in slow motion.
 
Jimmy - I believe the Euro will survive, because I think it has an important role to play. Europe is interlinked economically.

It's not that Greece has to stay - it's that overall, the major trading blocs truly are strongly economically linked. It doesn't really makes sense for all these countries to have their own currency. The Swiss are suffering brutally because of it, so Germany does better (both in trade and in growth) by carrying along some French and Italian deadweight.

He's correct that it is insolvency of sovereign governments. The solution would be a debt writeoff, which would require bailing out the banking system.

The Europeans appear not to be able to collectively confront the problem of insolvent governments. They have made matters much worse by kicking the can down the aisle.

The problem is political, not economic. Politically, the governments of the more stable countries are afraid to just write down debt because they are afraid that once they do it for Greece, they'll have to do it for Ireland, Portugal, Italy and eventually Spain. They don't want to do this because it would require dumping too much money into their own banks, so instead they are hanging, drawing and quartering Greece in order to scare other countries straight. It won't work because of the math. Spain may be able to pull out; Italy won't; Ireland will eventually restructure its debt.
 
PS: The reason I am so afraid of what's happening in Europe is that it seems to me that avoiding the problem is turning the ECB into the largest bad bank in the world. This is neither prudent nor necessary!

Your first loss is always your best loss. Take it and move on - the willingness to do that is what separates successful banks from failed banks.
 
MOM, on the double dip, I have to say that the cold call indicator has been saying recession for 3-4 months now. When I get cold calls from machining vendors on the wrong side of the Mississippi (remember, I'm out in Oregon) then it tells me that the support vendors for other firms are desperate. That means contraction on a wide scale.
 
One of my brothers told me something similar.

It's kind of a bleak landscape right now. The best I seem to be able to come up with is some chance that this won't be a terribly long one.
 
MOM, thanks for the input.

Too bad so many people have to suffer because of gutless or inept politicians. Taking the losses seems bad, but kicking the can down the road doesn't make it better. Sigh!

Who Struck John,
Thanks for that input. It doesn't preclude one last runup in the market, but it does mean we ain't reached bottom yet.
 
I tried to post a link about this article: the forever recession but it didn't work somehow. Anyway, I wondered about your thoughts on this. It reminds me of the white collar version of a blue collar guy with multiple part time jobs. If they could make it so that health care isn't tied to your job, it might be doable.
 
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