THE ELECTION, SMALL BUSINESS, AND THE ECONOMY WILLIAM DUNKELBERG CHIEF ECONOMIST, NFIB
TWO WAYS OUT, NEITHER DESIRABLE
INDEX OF CONSUMER SENTIMENT QUARTERLY APRIL 110 100 Index Value 90 80 70 60 50 78 83 88 93 98 '03 '08 '13 Source: University of Michigan
15 10 8 6 4 PREDICTED AND ACTUAL UNEMPLOYMENT RATE PREDICTED ACTUAL 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 76 Percent of Firms
12 10 8 6 4 2 0 CONSUMER CREDIT DELINQUENCY RATES (% of receivables) ALL CREDIT CARDS REAL ESTATE COMMERCIAL 14 91 Federal Reserve/Haver Analytics SEASONALLY ADJUSTED 94 97 '00 '03 '06 '09 12 15
EXPECTING BETTER ECONOMY UNIVERSITY OF MICHIGAN, 2/17 REPUBLICANS INDEPENDENTS DEMOCRATS I N D E X V A L U E 120 100 80 60 40 20 0
JOB GROWTH IN TWO NBER RECOVERY PERIODS, 1983 AND 2009 2009 1983 90 2000 1500 AVERAGE 689,000 AVERAGE 438,000 (535,000) 1000 500 0 500 1000 1500 1 4 7 10 13 16 19 22 25 28 HAVER ANALYTICS QUARTERS OF RECOVERY GDP GROWTH: 83 4.5% 09 2.1%
REAL GDP GROWTH IN NBER EXPANSION PERIODS PERCENT 6 5 THE WEIGHT OF GOVERNMENT 4 3 2 1 0 1958 1961 1971 1975 1980 1983 1991 2002 2009
SMALL BUSINESS FACTS 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES 99% HAVE FEWER THAN 500 PRODUCE HALF OF THE PRIVATE GROSS DOMESTIC PRODUCT EMPLOY 50%+ OF PRIVATE SECTOR EMPLOYEES PRODUCE 2/3RDS OF NEW JOBS
SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) 110 FIRST MONTH IN QUARTER 105 100 95 90 85 80 76 79 82 85 88 91 94 97 '00 '03 '06 '09 12 15
SEASONALLY ADJUSTED INDEX COMPONENTS ANSWERED OCT BEFORE AFTER NOV DEC JAN FEB MAR APR JOB CREATION 10 9 23 15 16 18 15 16 16 JOB OPENINGS 28 31 30 31 29 31 32 30 33 EXPECT EASIER CREDIT 6 4 5 5 6 6 3 3 4 EXPECT BUS COND BETTER 7 6 38 12 50 50 48 46 38 EXPECT HIGHER REAL SALES 1 4 20 11 31 29 26 18 20 EARNINGS TREND HIGHER 21 25 16 20 14 12 13 9 9 INVENTORY TOO LOW (NET) 4 3 6 4 3 5 2 5 3 PLAN TO INCREASE INVENTORY 2 4 4 4 4 2 3 2 3 GOOD TIME TO EXPAND 9 11 11 11 23 25 22 22 24 PLAN CAPITAL SPENDING 27 25 23 24 29 27 26 29 27 OPTIMISM INDEX 95 95.4 102.4 98 106 106 105 105 105
EXPECTATIONS FOR BUSINESS CONDITIONS IN 6 MONTHS (PCT BETTER - PCT WORSE ) FIRST MONTH EACH QUARTER 60 Percent of Firms 40 20 0-20 -40 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15 SEASONALLY ADJUSTED
OUTLOOK FOR BUSINESS 30 EXPANSION (PCT NOW IS A GOOD TIME ) FIRST MONTH EACH QUARTER NO for 30 QUARTERS Percent of Firms 25 20 15 10 5 0 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15 (SEASONALLY ADJUSTED)
BAD TIME TO EXPAND DUE TO THE POLITICAL CLIMATE QUARTERLY Percent of Firms 45 40 35 30 25 20 15 10 5 0 '01 '04 '07 % OF THOSE SAYING BAD TIME '10 '13 16 (SEASONALLY ADJUSTED)
REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3) FIRST MONTH EACH QUARTER Percent of Firms 30 20 10 0-10 -20-30 -40 76 79 82 85 88 91 94 RECESSION ENDS 97 '00 '03 '06 '09 '12 [% "HIGHER" - % "LOWER", SEAS. ADJ.] 15
EXPECTED REAL SALES FIRST MONTH EACH QUARTER Percent of Firms 50 40 30 20 10 0-10 -20-30 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 [% "HIGHER" - % "LOWER", SEAS. ADJ.] 15
GDP GROWTH RATE (QUARTERLY AT ANNUAL RATES) GDP GROWTH INDEX 12 10 HOUSING 110 8 6 4 100 2 0 2 4 6 76 79 82 85 88 91 94 97 '00 '03 '06 MFG/EXPORT '09 '12 15 90 8 10 NFIB DATA FIRST MONTH EACH QUARTER 80
THE DEBT DEATH SPIRAL
DEBT=.8*DISPOSABLE INCOME ACTUAL 16000 MAINTAINING DEBT/INCOME RATIO IN 1999 14000 12000 ($000) 10000 EXCESS CONSUMER DEBT: PAYING FOR THE PARTY 8000 6000 4000 2000 Federal Reserve/Haver Analytics 0 90 93 96 99 '02 '05 '08 '11 '14
100 80 60 40 20 0 CONSUMER NET WORTH NET WORTH BELIEVABLE??? HOUSING DOT COM Federal Reserve/Haver Analytics 76 7880 82 8486 88 9092 94 9698 '00 '02'04 '06 '0810 12 14 70 7274 TRILLIONS OF DOLLARS
CONSUMER NET WORTH RELATIVE TO GDP 5 4.5 NET WORTH PER DOLLAR OF GDP BUBBLE BUBBLE BUBBLE???? 4 AVERAGE 1970-1994 70 7274 76 7880 82 8486 88 9092 3.5 3 RECESSION Federal Reserve/Haver Analytics 94 9698 '00 '02'04 '06 '0810 12 1416 RATIO OF WEALTH TO GDP
STOCKS AND BONDS BOND INDEX (left) S&P STOCKS (right) 140 120 100 80 60 40 20 0 HAVER ANALYTICS 90 95 '00 '05 '10 '15 2500 2000 1500 1000 500 0
BILL PAYMENT, RECEIVABLES COLLECTION AND TRADE CREDIT Percent of Firms RECEIVABLES BILL PAYMENT TRADE CREDIT 0-5 -10-15 -20-25 -30-35 -40-45 -50 FIRST MONTH IN EACH QUARTER -55-60 NET % WITH A FAVORABLE RESPONSE '09 10 11 12 13 14 15 16 17
15 30 25 20 15 10 5 0-5 SMALL BUSINESS CREDIT PROBLEMS (% HARDER TO GET - % EASIER) FIRST MONTH EACH QUARTER 85 88 91 94 97 '00 '03 '06 '09 '12 76 79 82 Percent of Firms
55 50 45 40 35 30 25 REGULAR BORROWING ACTIVITY (AT LEAST ONCE A QUARTER) % OF OWNERS 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15 Percent of Firms
15 10 5 0 ALL CREDIT NEEDS NOT SATISFIED NEEDS NOT MET 96 99 '02 '05 '08 '11 14 17 93 Percent of Firms
'02 '05 '08 LOAN DEMAND: PERCENT NOT WANTING A LOAN 55 PERCENT OF ALL FIRMS NOT WANTING A LOAN RECESSION STARTS Percent of Firms 50 45 40 35 93 96 99 11 14 17
SINGLE MOST IMPORTANT PROBLEM FACING OWNERS Percent of Firms 45 40 35 30 25 20 15 10 5 0 INFLATION 76 79 82 85 88 91 94 97 '00 '03 '06 '09 12 15 CREDIT FIRST MONTH IN EACH QUARTER CREDIT: NO PROBLEM
35 30 25 20 15 10 5 0 MOST IMPORTANT PROBLEMS TAXES REGULATIONS WEAK SALES INSURANCE FIRST MONTH IN EACH QUARTER 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15 76 Percent of Firms
MOST IMPORTANT PROBLEMS 2016 1. RISING HEALTH CARE COST 2. COST OF REGULATIONS AND RED TAPE 3. FEDERAL TAXES ON BUSINESS INCOME 4. UNCERTAINTY ABOUT THE ECONOMY 5. TAX COMPLEXITY 6. UNCERTAINTY ABOUT GOVT POLICY 7. FREQUENT CHANGES IN THE TAX CODE 8. PROPERTY TAXES 9. STATE TAXES ON BUSINESS INCOME 10. FINDING QUALIFIED LABOR
17 25 20 15 10 5 0 AVERAGE RATE PAID ON SHORT TERM LOANS RATE PAID QUARTERLY 84 87 90 93 96 99 '02 '05 '08 '11 14 81 Percent
MORTGAGES TREASURY BONDS
60 50 40 30 20 10 0-10 -20-30 NET PERCENT REPORTING HIGHER INTEREST RATES [ ON THE LAST LOAN] 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 Percent of Firms
NIRP UNINTENDED CONSEQUENCES
OUR UNCERTAIN MONTH TO MONTH MONETARY POLICY 1.Fed s Mester Says Case for November Hike Will Likely Be Strong, Bloomberg.com: Economy, October 3, 2016 2.Fed s Dudley Advises Caution in Raising Interest Rates, Bloomberg.com: Economy, October 3, 2016 LAGS ARE LONG AND VARIABLE DATA ARE SIGNIFICANTLY REVISED AFTER ISSUE
ACTUAL PRICE INCREASES SEASONALLY ADJUSTED 80 FIRST MONTH EACH QUARTER Percent of Firms 60 40 20 0-20 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15 FIRST MONTH IN EACH QUARTER -40
CHANGES IN PRICES AND LABOR COMPENSATION COMPENSATION RAISED PRICES 40 30 SEASONALLY ADJUSTED NET % Percent of Firms 20 10 0 84-10 87 90 93 96 99 '02 '05 '08 '11 14 17-20 -30 FIRST MONTH IN EACH QUARTER
EMPLOYMENT AND JOB CREATION
40 35 30 25 20 15 10 5 UNFILLED JOB OPENINGS % WITH AT LEAST ONE UNFILLED OPENING FIRST MONTH EACH QUARTER 79 82 85 88 91 94 97 '00 '03 '06 '09 12 15 17 76 Percent of Firms
REASONS APPLICANT NOT QUALIFIED TYPICAL OCCASIONAL 40 35 30 25 20 15 10 5 0 SPECIFIC SKILLS WORK HISTORY SOCIAL SKILLS LEGAL WAGE EXPEC ENG/MATH APPEARANCE ATTITUDE DRUGS
15 17 25 20 15 10 5 0-5 -10 JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE FIRST MONTH EACH QUARTER 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 76 Percent of Firms
15 25 20 15 10 5 0 MOST IMPORTANT PROBLEMS LABOR COST LABOR QUALITY FIRST MONTH IN EACH QUARTER 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 Percent of Firms
0.4 AVERAGE CHANGE IN EMPLOYMENT PER FIRM FIRST MONTH EACH QUARTER 0-0.4-0.8-1.2 78 81 84 87 90 93 96 99 '02 '05 '08 11 14 17 NUMBER OF WORKERS
30 25 PERCENT OF OWNERS INCREASING OR REDUCING EMPLOYMENT INCREASED REDUCED FIRST MONTH IN EACH QUARTER Percent of Firms 20 15 10 5 0 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15
ACTUAL CAPITAL OUTLAYS Percent of Firms 75 70 65 60 55 50 45 40 % SPENDING %SPEND + LEASE LEASING ADDED FIRST MONTH IN EACH QUARTER 82 85 88 91 94 97 '00 '03 '06 '09 '12 15
16 45 40 35 30 25 20 15 PLANNED CAPITAL OUTLAYS (NEXT SIX MONTHS) FIRST MONTH EACH QUARTER 77 80 83 86 89 92 95 98 '01 '04 '07 '10 '13 Percent of Firms
INVENTORY INVESTMENT PLANS [% PLAN INCREASE % PLAN DECREASE] 15 FIRST MONTH EACH QUARTER Percent of Firms 10 5 0-5 -10-15 76 79 82 85 88 91 94 97 '00 '03 '06 '09 '12 15 SEASONALLY ADJUSTED
THE LATEST FED FORECASTS
SOME THINGS THE ELECTION HAS TAUGHT US
THE DEMOCRATS SWINGING FOR THE FENCE TOOK THEIR EYE OFF THE BALL
65
REFUNDS CLOSED
68
TRICKLE DOWN
ALWAYS FIND WAYS TO MAKE YOUR JOB INTERESTING