Tuesday, June 13, 2006

US small business: Economic growth is slowing

Here is some more economic news that isn't good. From Yahoo News:

WASHINGTON (Reuters) - Small-business owners expect U.S. economic growth to slow from the first quarter of 2006 as they foresee weakening business conditions during the next six months, according to a private sector survey.

The National Federation of Independent Business reported on Tuesday that its index for small business optimism shed 1.6 points, falling to 98.5 in May .

"It's hard to beat the first-quarter performance, so a 'slowdown' is definitely going to happen," William Dunkelberg, NFIB's chief economist, said in a statement. "The only question is how far and how fast."

"For some observers, this might be the signal of a turning point for the economy, marking a slowdown in economic activity," Dunkelberg said.

But Dunkelberg said the slowdown is coming from strong levels, "so overall the economy is still looking fairly good."

Talk about polishing a turd here! Small businesses are seeing a slowdown in economic growth. The National Federation of Independent Business' chief economist reports that this slowdown is going to happen, and that it could be a turning point signal. Then while this economist turns around and makes a complete ass of himself by claiming "overall the economy is still looking fairly good," even though he has reported that there is a slowdown. Talk about hypocrisy here!

I'm not going to say that a slowdown is bad. If an economy continues to expand and overheat, you could get an inflationary situation of too much money chasing after too few goods, or even a deflationary situation where too much output chases after a tightening money supply. This economy has had a five year expansion, due to Bush tax cut stimulus, home mortgage refinancings, and even increased government spending on both guns and butter--the war in Iraq, and the tax cuts. Oil and prices have shot up due to the terrorist premium, and market fears on the war in Iraq. The budget deficit is out of control, and will get worst as the Baby Boomers start to collect their Social Security and Medicare benefits. The federal government's debt now stands at over $8 trillion, with foreigners holding vast amounts of T-bills. Gold prices have gone up over the past four years, although they have dropped slightly over the past couple of months. And the Dow has given up its 2006 gains. So while this Dunkelberg may claim that the U.S. economy is "still looking fairly good," I would say that the economy is skating on thin ice. Any of these problems could sink the U.S. economy into a recession--and these are just the economic problems. How about considering the big political problem, such as a Bush attack on Iran?

There is some interesting details regarding this story. Continuing on:

The decline came on the back of a reduction in job openings and capital spending plans, and an increase in the number of small-business owners "who believe business conditions will be worse in six months than they are now," the report said.

Fifty-six percent of small business owners hired or tried to hire one or more workers in May. However, of that total 84 percent of these owners reported few or no qualified applicants for the positions they were trying to fill.

During the next six months, 26 percent of the firms plan to create new jobs and five percent plan workforce cutbacks.

The NFIB data suggests the job market is tight with strong intentions to hire frustrated by the lack of qualified applicants, Dunkelberg said.

Job creation plans were especially strong in construction and the wholesale trades, the NFIB said, adding that "small firms in the construction industry still have not planned for a substantial slowdown in housing demand."

The job market is tight with strong intentions to hire frustrated by the lack of qualified applicants? I'm not sure what to say about this. Are firms only willing to hire applicants that completely fit whatever their qualifications are, and are refusing to hire and train lesser qualified applicants? Are firms refusing to provide any money for training employees? And now that the economy is slowing, firms will be cutting back on their hiring plans, forcing their current staff to work harder for the same stagnating wages. This part of the story doesn't make sense, unless you consider that firms are only willing to hire superstars that can go into a company's operations without any need for training. By not having to spend money for training employees, firms can further reduce their labor costs, and boost their profit margins. The problem here is that there are few superstars in this economy, but there could be a larger number of qualified applicants, who may lack a few of the job skills that companies are requiring, but can come up to speed with company training programs. And these applicants are being rejected.

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