Econintersect: The headline should be that the National Federation of Independent Business (NFIB) in September 2011 fell for the sixth month in a row to the lowest level since March 2010. But the rant on the Obama administration makes better news:
Business expansion, the purchase of new equipment and vehicles and even hiring are “long term” investments. Most important to the decision process is the sales forecast, but against expected sales over the life of an asset, the owner must figure in labor costs, taxes, the cost of new regulations, financing costs and the like to decide whether or not an “investment” will pay off. This is one reason why “short term” stimuli don’t work. The planning horizon for the private sector is longer than the time to the next election!!! At this point, no one knows what their tax rate will be 6 months from now; no one knows what the health care will do to labor costs. Higher for sure, but by how much? Yes, the President suspended costly EPA rules that were going into effect, but you know that they will be back after the election if he wins.
The NLRB is pushing the union agenda, card check, mandating owners to post notices of the right to unionize, interfering with Boeing’s business decision making (and the President’s Chief of Staff was on Boeing’s board when the South Carolina project was approved). Supporters of the Administration are pushing for another hike in the minimum wage and the new CEA chairman favors and wants a national sales tax to be imposed. It would take a book to itemize it all. Short-term fixes will not help, private sector decision makers think longer term – they do and they don’t like what they see, there is little clarity or certainty. Consumer spending is still a key factor and 9 of 10 people who want a job still have a job and would spend more if they were more confident about the future.
Highlights of the survey:
- Sales remain the largest problem for small firms—a full quarter identifying “poor sales” as their top business problem. The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past three months lost 1 percentage point, falling to a net negative 9%, with more firms with sales trending down than up. Owners appear to have lost confidence in the economy and the government’s ability to assist the recovery.
- The net percent of owners expecting better business conditions in six months was a negative 26%, down 11 points from July, and 36 percentage points lower than January.
- The frequency of reported capital outlays over the past six months rose 2 points to 52% of all firms in August, the first improvement in many months. Of those making expenditures, 36% reported spending on new equipment (unchanged), 20% acquired vehicles (up 3 points), and 13% improved or expanded facilities (up 1 point). Five percent acquired new buildings or land for expansion (unchanged) and 10% spent money for new fixtures and furniture (unchanged). The percent of owners planning capital outlays in the next three to six months rose 1 point to 21%, a recession level reading that has typified the recovery to date.
- Over the next three months, 11% plan to increase employment (up 1 point), and 12% plan to reduce their workforce (up 1 point), yielding a seasonally adjusted 5% of owners planning to create new jobs, a 3 point gain over July.
