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Tuesday, September 13, 2011

NFIB September

This was kind of a shock. Expectations for better business conditions in six months fell 11 points from July and is now 36 points below January's report. Expectations for higher real sales fell 10 points from July and is now 25 below January's report.

Current job openings dropped 3 points. Higher nominal sales over last three months fell to -9%. Note that is nominal, not real. Four percent reported borrowing as their main problem. Ninety-three percent reported all their credit needs met, which has increased from the very steady 91% reported this year.

The major factors affecting the optimism index were the six-month expectations, and the correlation between sales experience and higher real sales expectations kind of indicates that this is going to be sticky. At! !!!!! 88.1!!!!!! the optimism index is now lower than it was in Augusts of 2008, 2009 and 2010. The record low was achieved in March 2009 at 81.0. No words can express the impact that "outlook for better business conditions six months from now" had on me. Look at it for yourself:

Yes, folks, we achieved a record low on that baby. Note that the record low followed sharp degeneration in the previous two months, so it is hard to dismiss this as a one-off.

If it were not for the SuperDoc's despised but highly effective cardiac diet, I probably would have had a heart attack and died when I saw this.

Let's see - this is the indicator in NFIB reporting I watch most closely. When it gets into negative double-digit territory for three months running, as it did Nov 07, Dec 07, Jan 08, the odds of a recession are very high indeed. We have now achieved that, and I think I must abandon hope for the "skipping recession" theory.

The three month sales outlook gives you insight on timing:

Refer back to the 2008 summer reports. Note that this indicator too has been steadily dropping this year since March.

So I'd have to say the small business recession is NOW, and that the vaunted jobs bill won't have an effect. People just aren't going to hire in this environment.

Small businesses were highly supportive of Obama's election and desperately wanted health care reform. What they got was a crushing disappointment - essentially most of the burden of health care insurance market costs was left on their shoulders, and it is unquestionably cutting into hiring. With our current demographics, small businesses have as steadily aging group to cover, and that includes the business owners!

So two conclusions: Obama cannot win reelection - without this group which would best be described as "Independent" he has no chance - and we cannot avoid recession. There are about 114-120 million households in the nation. Mailing a $1,000 check to each one this month would push the sales expectations up enough to make a difference, but it would cost at least 114 billion. If you did that three more times, it probably would keep us out of recession this year and the next. It would also be cheaper than Obama's proposal.

Only very immediate action would work now. Also it would have to be sustained. I believe sending three rounds of $1,000 checks (one every three months) would do it, and it would give time for 100 billion allocated to infrastructure spending to kick in by next summer.

Obama's current proposal is quite futile and would, even if passed, take effect too late to do much.

PS: Also worth a read is the UK's Independent Commission on Banking Final Report.

Any monetary stimulus in this household would go right out the door for past due property tax. Anything left over would service debt. At least those sectors would get a bounce.
Excellent commentary and analysis as usual. Some anecdotal observations made in the Dallas TX area.

1. The retail store that buys and sells used childrens items (clothes, strollers, car seats) formerly only bought goods on Mon-Fri. They have now extended purchasing to Mom-Saturday. Saturdays were always so busy that they had to hire more people to also buy.

2. Above mentioned store has now opened a used adult women's clothing and accessories store.

3. Noticed that Kroger will no longer double or triple coupons. Extreme couponing starting to hurt?

4. Did you notice the article in the AARP magazine interviewing people who were still living in their house but hadn't made a payment in "X" years.

5. The wife's company hired a new programmer who is Asian. I thought it was interesting that he made a comment that he wanted to work there as it was "a stable place to work". He was quite overqualified for the position but almost all the resumes were.

6. Too bad that all our politicians have a graduate degree from Stupid University. Have they ever bothered to look at how Unemployment works from the Employers' point of view. If I hire someone, then sales don't hold up to support him, so that I have to fire him/her it kills the employer's State Unemployment Tax rate for roughly the next 2-3 years depending on state. Go from a .7% tax rate on the employees' first $12,740 of earnings to 8.4% of said earnings and one understands why employer's either hire a temp or not at all.

7. Did you see where the Fed study said that 62% of US Households expected a flat or declining household income for the next year? Since the MIT Billion Price Project shows inflation at 4% year over year, the math is extremely bad.

The major problem with $1k/3mo to
the spenders is they, unlike the
teachers unions (getting $30B),
won't have sense enough to kick
back a % to the Obama for prez
I think it is better called a "Job Bill".

Since Obama cannot run on his record - even he recognizes dismal failure, this whole "Jobs Bill" is just a straw man the he is setting up to so he can campaign against Congress and preserve the only job that matters to him - his.

One job, more important than the nation's economy.
If you look at the jobs bill you see there's a tax on municipal bond income. Let this be my public declaration that if it passes I will be forced to reduce my staff to reflect the drop in income. That how it works in my life. Make less, spend less. Perhaps congress and the President might try thAt.
The tax code has got to be reformed.
Unfortunately for the poor and middle class
they will be left to bear the burden.
Sporkfed - the poor and much of the middle class pay essentially nothing in personal income taxes, so your comment must pertain to the modest FICA which only those who have jobs pay. Nowhere in your comment do you mention the extensive benefits " the poor " and lower middle class receive which are so large that even the poor consume at not-poor, in fact a lower middle class level. These people are not victims of society, they have more income security than millions who face the same struggles but do not so casually become public burdens.
My own anecdotal observations are that we are in MUCH worse condition than in 2008, notwithstanding the official stats. There is one industrial park near my kids' school, and I have been driving through this for...heck, much of my life.

It is empty. Oh, there are a few businesses still there, but building after building...For Lease signs, empty parking lots and empty window bays.

The neighborhood has not worsened, nothing else is different. Business is just shot-to-hell. I see it in strip malls. These are the small businesses that cannot make it in this environment.

I don't see the businesses or the jobs coming back, not under this administration. This is in a major city's metro area, not a small town that has lost its one factory.
The poor and middle class pay a higher percentage
Of their income in total taxes than do the wealthy.
Capital gains at 15 percent, FICA taxes capped,
Income taxes are only a part of the picture.
Does anybody here really think that the tax code,
trade policies, and dollar devaluation are designed
to benefit anyone but the wealthy and MNCs ?
Look at labor's share of productivity gains over the
last 40 years and tell me the poor and middle class
are the cause of the problems.
Fred - I will admit that my first incredulous reaction to Obama's "Jobs" speech was that this brought a new level of meaning to the drive for publicly financed elections.

Teri - Very many people would use it to pay down debt, but that would pay off nonetheless. Also you would see a lot of spending on clothing, utilities, tires and car repairs and the like. But some who are in slightly better position would buy a new car (quite a bit of help with car payments) and some would be able to parlay the additional money into a home purchase.

Without really hitting the effing pedal, we're nowheresville.
CF - without taking the lid off by maybe doing something about the unemployment ins tax rate and definitely health insurance, I think it is safe to say that any significant rise in tax rates will produce a drop in jobs.

We have to try to be realistic about this - the situation doesn't have a lot of upside for most businesses. I don't think IL, for example, did real well out of their tax increase this year, and the rise in property taxes over the last decade has knocked a lot of homeowners who owed nothing on their homes out of them.

It's not as if raising taxes on business owners is exactly a recipe for economic growth.
Anon @ 6:08 PM - I agree. I've been driving around some of the NE, and I'm appalled at the commercial AND residential property for sale. Entire neighborhoods seem to be buckling, and I'm not talking about recent developments. I'm talking about neighborhoods that were long established, very nice, in favorable locations and where property listed was selling out within 3-4 months even in the depths.

We're still buckling - and if we go into a hard downturn with this fragile an infrastructure, not to mention little help from economic buoyancy overseas, we will lose more of the underpinnings.

I figured the collapse in the rural areas, but it is quite disturbing to see what's out there in the denser, wealthier and traditionally more resilient areas.
Learner - I hadn't read the AARP report, but I don't have trouble imagining it.

People are spending a lot less even on the old "must" categories like children's clothing and pets.

The unemployment gate is unquestionably curbing hiring, but at this point with the stats we have, I think any meaningful intervention would have to go primary. It is almost impossible for over 1/2 of the businesses to hire with stats like these.

Thanks for the observations. I noticed in particular in August that food prices were rising quite a bit, mostly on basics. The pasta alone tells a bad tale about the economy. Red beans are VERY expensive. People are searching for all the meat substitutes, it looks like.
the poor and much of the middle class pay essentially nothing in personal income taxes, so your comment must pertain to the modest FICA

The biggest bite for the poor and working class are sales taxes, property taxes, and the costs associated with extra regulation.

Sales taxes in my area are double (percentage-wise) what they were 30 years ago. My property taxes are almost double (dollar-wise) what they were 10 years ago and the property value is essentially unchanged (the "asessed value" is pretty much a joke and has been for decades). Then think about the taxes involved in owning a car - the EPA rules force a blend of gasoline that tacks on high royalty payments for the "inventor" of the blend; add to that the cost of maintaining the vehicle to comply with clean air regs that didn't exist 20 years ago.

This doesn't even scratch the surface of the everyday things each consumer is forced to pay additional monies for "compliance" (all conveniently rolled in to the price to hide the dozens of extra charges) that didn't exist 20-30 years ago.
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