Rebound Continues

Bill Dunkelberg

Small business owners expect to increase spending on everything -- inventories, capital equipment and labor. Plans to expand employment rose to a net 14 percent of all owners (of those planning to reduce employment). Earlier this year, only 8 percent planned to increase total employment, not enough to generate new jobs for the economy. Owners with “hard to fill” job openings jumped to 21 percent, which will push the unemployment rate back down toward 6 percent. Inventory decumulation has occurred for the past 29 months. Now, a historically high 6 percent of owners plan to add to inventories in the coming months, good news for manufacturers.

Credit markets remain very friendly and rates are very low, so get your liabilities restructured now. There should be no problems getting the financing needed in anticipation of a faster growing economy.

Relatively few firms -- primarily service sector firms -- were able to raise selling prices. In manufacturing and distribution, more firms are still reporting more price cuts than increases. Still the trend on profit growth has been improving. More owners are reporting positive quarter-over-quarter profit growth. However, one in five owners reported raising employee compensation, even in industries with no pricing power. Much of this may be driven by the rising cost of health insurance. The cost and availability of insurance remained the top business problem for business owners -- in fact, about 1 in 4 owners say this is their No. 1 business problem.

GDP will be growing a lot faster in the second half, up to almost 5 percent if small business doesn’t slip. Adding new paychecks to the mix will keep consumer spending on a solid track. Add to that rampaging government spending and renewed investment spending, and you have the ingredients for much stronger economic growth moving into 2004.

NFIB’s Small Business Economic Trends, begun in 1973, is the longest continuous survey of small business optimism and conditions. It is frequently quoted by Federal Reserve Chairman Alan Greenspan and national media. Monthly surveys are sent to more than 2,500 NFIB members and quarterly surveys are sent to more than 7,500 members. The few minutes members spend completing the surveys adds to NFIB’s stature as the source of the nation’s foremost research about small business. Go to to find the latest reports.

Bill Dunkelberg, Chief Economist for the National Federation of Independent Business
Copyright 2008, NFIB retains ownership. All Rights Reserved.




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