THE ELECTION, SMALL BUSINESS, AND THE ECONOMY WILLIAM DUNKELBERG CHIEF ECONOMIST, NFIB PROFESSOR OF ECONOMICS EMERITUS TEMPLE UNIVERSITY

SMALL BUSINESS FACTS 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES PRODUCE HALF OF THE PRIVATE SECTOR GROSS DOMESTIC PRODUCT EMPLOY 50%+ OF PRIVATE SECTOR EMPLOYEES PRODUCE 2/3RDS OF THE NEW JOBS

TWO WAYS OUT, NEITHER DESIRABLE

Young Ben

RATING OF GOVERNMENT POLICY

MOST IMPORTANT PROBLEMS 1. RISING HEALTH CARE COST (1) 2. COST OF REGULATIONS AND RED TAPE (5) 3. FEDERAL TAXES ON BUSINESS INCOME (6) 4. UNCERTAINTY ABOUT THE ECONOMY (2) 5. TAX COMPLEXITY (7) 6. UNCERTAINTY FROM GOVERNMENT POLICY(4) 7. FREQUENT CHANGES IN THE TAX CODE (8) 8. PROPERTY TAXES (9) 9. STATE TAXES ON BUSINESS INCOME (10) 10. FINDING QUALIFIED LABOR (32) (2012 RANK)

UNCERTAINTY UNCERTAIN CERTAIN (GOOD OR BAD) SUM OF “DON’T KNOW” “UNCERTAIN” ANSWERS ON 6 QUESTIONS UNCERTAIN CERTAIN (GOOD OR BAD)

JOB GROWTH IN TWO NBER RECOVERY PERIODS, 1983 AND 2009 AVERAGE 689,000 AVERAGE 438,000 (535,000) QUARTERS OF RECOVERY GDP GROWTH: “83” 4.5% “09” 2.1% HAVER ANALYTICS

REAL GDP GROWTH IN NBER EXPANSION PERIODS THE WEIGHT OF GOVERNMENT

SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) PEAKED Q1/2015 AS DID UofM

GDP GROWTH RATE (QUARTERLY AT ANNUAL RATES) HOUSING MFG/EXPORT NFIB DATA FIRST MONTH EACH QUARTER

EXPECTATIONS FOR BUSINESS CONDITIONS IN 6 MONTHS (PCT “BETTER” - PCT “WORSE”)

EXPECTED BUSINESS CONDITIONS IN 6 MONTHS OCTOBER PERCENT OF FIRMS NSA

OUTLOOK FOR BUSINESS EXPANSION (PCT “NOW IS A GOOD TIME”) “NO” for 30 QUARTERS

BAD TIME TO EXPAND DUE TO THE POLITICAL CLIMATE % OF THOSE SAYING “BAD TIME”

REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3) RECESSION ENDS

EXPECTED REAL SALES

“EXCESS” DEBT: PAYING FOR THE “PARTY” MAINTAINING DEBT/INCOME RATIO IN 1999 HAVER ANALYTICS

THE DEBT DEATH SPIRAL

Consumer Net Worth BELIEVABLE??? HOUSING DOT COM

Consumer Net Worth Relative to GDP BUBBLE???? BUBBLE BUBBLE AVERAGE 1970-1994 RECESSION

REGULAR BORROWING ACTIVITY (AT LEAST ONCE A QUARTER)

SMALL BUSINESS CREDIT PROBLEMS (% HARDER TO GET - % EASIER)

ALL CREDIT NEEDS NOT SATISFIED

LOAN DEMAND: PERCENT NOT WANTING A LOAN RECESSION STARTS

BILL PAYMENT, RECEIVABLES COLLECTION AND TRADE CREDIT FIRST MONTH IN EACH QUARTER NET % WITH A FAVORABLE RESPONSE

SINGLE MOST IMPORTANT PROBLEM FACING OWNERS FIRST MONTH IN EACH QUARTER CREDIT: NO PROBLEM

NET PERCENT REPORTING HIGHER INTEREST RATES [ ON THE LAST LOAN]

OUR UNCERTAIN MONTH TO MONTH MONETARY POLICY Fed’s Mester Says Case for November Hike Will Likely Be Strong, Bloomberg.com: Economy, October 3, 2016 Fed’s Dudley Advises Caution in Raising Interest Rates, Bloomberg.com: Economy, October 3, 2016

NIRP UNINTENDED CONSEQUENCES

HOW HELPFUL IS FORWARD GUIDANCE HOW HELPFUL IS FORWARD GUIDANCE? “But, if inflation were slightly above 2 percent even as unemployment remained far above levels consistent with maximum employment, then the unemployment consideration would dominate because we would be further from the unemployment objective than we are from the inflation objective.” NY NABE May, 2014

ACTUAL PRICE INCREASES SEASONALLY ADJUSTED FIRST MONTH IN EACH QUARTER

CHANGES IN PRICES AND LABOR COMPENSATION FIRST MONTH IN EACH QUARTER

UNFILLED JOB OPENINGS % WITH AT LEAST ONE UNFILLED OPENING

REASONS APPLICANT “NOT QUALIFIED”

JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE

MOST IMPORTANT PROBLEMS FIRST MONTH IN EACH QUARTER

AVERAGE CHANGE IN EMPLOYMENT PER FIRM

PREDICTED AND ACTUAL UNEMPLOYMENT RATE

PERCENT OF OWNERS INCREASING OR REDUCING EMPLOYMENT FIRST MONTH IN EACH QUARTER

NET PERCENT OF OWNERS INCREASING EMPLOYMENT

ACTUAL CAPITAL OUTLAYS LEASING ADDED FIRST MONTH IN EACH QUARTER

PLANNED CAPITAL OUTLAYS (NEXT SIX MONTHS)

ACTUAL CHANGE IN INVENTORY (% INCREASING - % REDUCING)

INVENTORY INVESTMENT PLANS [% PLAN INCREASE – % PLAN DECREASE]

Quarterly ISM NON-MFG INDEX predicted by NFIB survey Q3 NMISM READING 4Q FORECAST BASED ON OCT NFIB DATA SURVEY FIRST MONTH IN EACH QUARTER

MOST IMPORTANT PROBLEMS FIRST MONTH IN EACH QUARTER

ALWAYS FIND WAYS TO MAKE YOUR JOB INTERESTING

THE DEMOCRATS SWINGING FOR THE FENCE TOOK THEIR EYE OFF THE BALL

TABLE

TABLE PRE AND POST ELECTION INDEX COMPONENTS

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