Main Street Down and Out? 16 comments
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The stock market is on a tear because the US Treasury and Federal Reserve will do whatever is necessary to prop up banks and automakers. Very reassuring. Wonderful.
How much of it will trickle down to mom-and-pop small business is an open question. Most big firms have cut their consultants and all other nonessential expenses like entertainment, interior design, advertising, travel, free food (at Google (GOOG)) and, of course, construction -- all of which were supplied by mom-and-pop small business.
The SBA says small firms:
- Represent 99.7 percent of all employer firms.
- Employ about half of all private sector employees.
- Pay nearly 45 percent of total U.S. private payroll.
- Have generated 60 to 80 percent of net new jobs annually over the last decade.
- Create more than half of nonfarm private gross domestic product (GDP).
- Hire 40 percent of high tech workers (scientists, engineers, and computer workers).
- Made up 97.3 percent of all identified exporters
Sectors that have small business shares greater than 80 percent: construction, professional and technical services, health and social services, arts and entertainment, accommodation and food services. Holding companies are equally split between large and small businesses. Half of all trade (wholesale and retail), administrative, and waste management services are mom-and-pop firms. Job losses on Main Street are invisible, thanks to the backward-looking BLS "birth/death" model that ignores the current reality of zero start-ups, zero venture capital, a flood of small business closures, and a rising tide of loan defaults and bankruptcy. There's no mystery what's happening on Main Street. Here are the latest charts from NFIB. Sales, earnings, and optimism fell off a cliff. Papering over Citi (C) and Merrill is irrelevant.
Disclosure: Author owns a small business
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Small business is hurting all over this country and no one is listening. Why? They aren't AIG, Citi, FannieMae, etc and don't have the cash to donate aka pay-off congress. I wrote an article on how big government is hurting small business...www.washingtontimes.co.../
"Steve Jobs and Steve Wozniak had been friends for some time, having met in 1971... Jobs managed to interest Wozniak in assembling a machine and selling it. Jobs approached a local computer store, The Byte Shop, who said they would be interested in the machine, but only if it came fully assembled." en.wikipedia.org/wiki/...
Larry Page and Sergey Brin invented Google while they were grad students, using a Stanford computer. en.wikipedia.org/wiki/...
> Do keep in mind that moral hazard dictates that some companies may
> be too big to fail. The economic consequences of not bailing them
> out exceeds the cost of the bailout.
This is incorrect. Some firms are "too big to fail" because of the PERCEIVED POLITICAL impact on the President and members of Congress. No company is truly "too big to fail;" that moniker is only given to companies that somehow have an important role in the political economy (i.e. large & unionized workforce, counterparty to agreements with other firms with political clout). The political calculus comes to this: We will use a "small" amount of money from EACH taxpayer to bail out a particular company because--if we do not do so--a large and powerful political constituency will be injured, thereby lessening its ability to provide us with money & manpower for re-election efforts. Doubtless, this game has gone on as long as the Republic has existed, but attention should be called to it so that voters can decide whether they agree with such moves.
> Your point being?
That the two companies you named were small businesses before they attracted venture capital and eventually went public. And, no matter how wonderful you think Apple and Google are, the next big thing is a bootstrap start-up in somebody's garage.
Meanwhile, the moral values and work ethic of small business is nothing to sneeze at. Margaret Thatcher's father owned a grocery store. Ronald Reagan grew up in an apartment above a small town five-and-dime variety store. Harry Truman owned a haberdashery.
No matter where you live in the world, every day you rely on small business to milk the cows, drive owner-operated 18-wheelers, sell coffee and pizza and chinese food. Your doctor and dentist are probably self-employed or in a small professional practice. Your CPA or bookkeeper certainly isn't Coopers or KPMG. Where did you buy your car? Who owns the McDonald's franchise?
Answer: small business.
On May 05 11:18 AM Cetin Hakimoglu wrote:
> Do keep in mind that moral hazard dictates that some companies may be too big to fail.
Dearest Blockhead, moral hazard *is* bailing them out. It encourages bad behavior and inspires others to do worse.
"the middle class -- the small tradespeople, shopkeepers, and retired tradesmen generally, the handicraftsmen and peasants -- all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on" (The Communist Manifesto)
Politicians are saying "YES WE CAN" and the banks are saying "NO YOUR NOT".
And what happens to Valley National's customers -- the small businesses and property developers and savers whose taxes are going to go up, to pay for $ trillions wasted on Citi, BofA, Fannie, Freddie, AIG etc?
What small and medium enterprises (SME) need to thrive is no different than you or I, as individuals. Reasonably small taxes. High employment. Low inflation. Honesty and transparency at every level of government and investment banking.
I'll get off my soap box and shut up. But the economic cost of free lunch and skyrocketing debt will be paid by those who were least culpable and most industrious.
Each Friday, teachers in elementary schools in a corner of the richest country in the world quietly slip packs of peanut butter, fruit and granola bars into some pupils' bags - enough food to get them through the weekend before school dinners resume on Monday.
Not a word is said to the pupils or their parents because, even as the number of families in West Virginia dependent on food handouts continues to rise, many are ashamed to admit to their friends and neighbours that they need help.
"The teachers spot the children they think aren't getting enough to eat at home, those from families they know are having difficulties," said Carla Nardella, who heads the state's main food bank which distributes free boxes of groceries and supplies soup kitchens in West Virginia.
"These are proud people, so the teachers do it discreetly. We call them backpack snack packs, and started distributing them this year to give extra food to children because the situation is getting more difficult.
"We've begun with 400 children. It's our hope that one day there will be a programme like this in every school in West Virginia, because there are children in every school who need help. It's so hard seeing children go hungry."
It is not just the children. One in six of West Virginia's 1.8 million people receive government food stamps - one of the highest rates in the country - and the total is rising by the week.
(UK Guardian)
> Each Friday, teachers in elementary schools in a corner of the richest
> country in the world quietly slip packs of peanut butter, fruit and
> granola bars into some pupils' bags - enough food to get them through
> the weekend before school dinners resume on Monday.
Hmmm...looks like I can possibly get a class action lawsuit for peanut-allergic kids going in WV. Must find local counsel...
Employers big and small have resorted to slashing hours and once-unthinkable wage cuts. In March, staffing agencies that work for Microsoft agreed to a 10 percent reduction in their bill rate. In April, hotel operators in New York City asked unionized waiters, housekeepers and bellhops to reopen their contract and accept wage cuts. State governments such as Indiana's have frozen pay, while others, including Maryland and California, have furloughed employees.
According to a recent Washington Post-ABC News poll, more than a third of Americans say they or someone in their household has had their hours or pay cut in the past few months. That's a nine-point increase since a similar poll was conducted in February. (Washington Post - h/t Mish)