While GDP growth rebounded slightly in the second quarter, it is quite clear that 2014 will likely be just another sub-par year of growth and low small-business optimism. Consumer spending has been weak, spending on plant and equipment modest, and government purchases have been restrained. Payroll employment has finally recovered its peak level reached in […]
While GDP growth rebounded slightly in the second quarter, it is quite clear that 2014 will likely be just another sub-par year of growth and low small-business optimism.
Consumer spending has been weak, spending on plant and equipment modest, and government purchases have been restrained.
Payroll employment has finally recovered its peak level reached in the last expansion. But overall employment, including the self-employed and agricultural employment, is still well below the level reached in January, 2008.
The 6.3 percent unemployment rate is still unacceptably high, especially because most of the decline in the rate has been accounted for by departures from the labor force, not new job creation.
The president wants to stimulate the economy by raising the minimum wage so that employees have more money to spend — naively not understanding that every dollar that a minimum-wage employee receives will come out of someone else’s pocket, mostly through higher prices. This is a negative-sum game with some employees losing their jobs and incomes entirely as a result, while consumers are taxed with higher prices in order to pay higher wages. Those who lose their jobs will not be able to spend much at all, unless they can get on the government dole.
Historically, small businesses produced half of the private GDP and employed half the private workforce. But in this recovery, the economy became bifurcated, with the large firms doing very well, benefiting from government policies and exporting, while small firms have received the brunt of a misguided set of policies like Obamacare, the EPA (Environmental Protection Agency) regulations, higher tax rates, misguided labor policies — to name a few.
In June, 10 percent of consumers felt government was doing a good job, down from 14 percent a year ago — both terrible readings. Fifty percent of consumers say the government is doing a poor job. This is what’s keeping a lid on consumer spending and on the small-business economy.
Bill Dunkelberg is the chief economist at the National Federation of Independent Business, or NFIB. This editorial is drawn and edited from a news release and video that the NFIB issued on July 29. To check out the video, visit http://vimeo.com/101299979