There were a slew of bad news items on small businesses yesterday that underscores the fact that true job creators are being ignored to the detriment of an overall economic recovery. The latest Chamber of Commerce survey of small business executives (revenue of $25.0 million or less) revealed shocking trends.
* 64% not expecting to add to payrolls in 2012
* 12% plan to cut jobs in 2012
* 19% expect to hire in 2012
It's all about economic uncertainty first and foremost (55% top concern) that's holding back these businesses that are the backbone of the nation. According to a review of the survey in the WSJ, a third point to a lack of sales and 7% say there is trouble getting credit. The more glaring part of the problem is 41% see the business climate getting worse over next two years.
Only 29% expected it to get better.
This is coupled with a report from the Ewing Marion Kaufman Foundation that shows a long-term trend or "leak" of jobs. I've written about this situation before, and the problem actually goes back even further than the Kaufman Foundation report. But, it seems to be getting worse. Historically, new firms in the United States generate about 3 million jobs a year, but in 2009 it was only 2.3 million.
In the 1990s, new businesses opened doors with about 7.5 jobs...now it's 4.9 jobs. Case in point last month is small businesses (500 employees or less) having hired 147,000 workers; that makes 2.3 million look like a hiring binge. In the meantime, large businesses only hired 10,000.
There is no help on the way from the federal government. Just consider the White House Jobs Creation Council is stacked with fat cats from giant businesses and deep-pocketed Wall Street-types. Heck, there are more union members and academics on the list than small business operators (see table above). Unions destroy jobs. Consider the last ten years where jobs have been created and lost. Hint...so-called right to work states is the place to be where you aren't forced to join a union; job creation would zoom.
There is a long-term problem that must be addressed with respect to job creation. There are numerous factors, including productivity gains, but also rules and regulations (according to the Chamber of Commerce there are 170,000 business regulations on the books). Job creation has slowed for years, but has crashed more recently. The only way to restart that old trend is to unleash our potential not bottle it up with rules, regulations, belittlement, and higher taxes.
* 1940-1950 +39.1%
* 1950-1960 +17.0%
* 1960-1970 +27.3%
* 1970-1980 +27.2%
* 1980-1990 +22.8%
* 1990-2000 +21.9%
* 2000-2010 -2.9%
I really wish there was a better way to allow small businesses to carry the day rather than big business and government fighting over taxpayer loot. Ironically, even with advancements in technology and the depths of the recession, it would seem job creation is long overdue. I don't think there has been a paradigm shift so disruptive that an abundance of jobs can't be created. I think it is clear, however, businesses are scared to death. Sadly, they should be.
It was just plain ugly yesterday. The market stumbled out of the gate on the same old stuff that in and of itself must finally be weighing on investors. The European debt crisis shifted over to Italy, apparently following the march of man's embrace of democracy. It's almost crazy that all of a sudden Italy is making headlines. Is it really an epiphany that the Euro rescue file has to be expanded to save Italy? Sure, the notion of €1.5 trillion Euros is tough to swallow - where would the money come from? I think Italy/Europe and the U.S. debt debate will continue to set the tone for the market. In the meantime, Alcoa (NYSE:AA) posted results that missed consensus by a penny.
The Small Business Index from the NFIB decreased and remains firmly locked in recession territory. It all boils down to one thing according to NFIB Chief Economist Bill Dunkelberg: "no confidence in the federal government." I'm going to interview Bill today on the Fox Business Network in the 2PM EST hour so please tune in.
Equity futures have been a tempest in a teapot this morning as Italy continues to spook global markets. A bond offering saw higher yields but also buyers stepped up. Those mixed messages brought some relief to the market which was pointing to a 100 point loss on the Dow at the open. Still, there is serious tension in the air. In addition, trade numbers came out this morning that saw our gap widen -a disappointing but expected revelation.
I see signs this morning the market wants to rally but needs real impetus. For that reason we are not forcing the issue this morning but suggest you don't panic, either. Everyone should have cash, however, if not touch base with a representative.