William C. Dunkelberg, chief economist for the National Federation of Independent Business, the nation’s leading small business organization , issued the following statement on March job numbers based on NFIB’s monthly economic survey that will be released on Tuesday, April 14. The survey was conducted through March 30 and reflects 867 small business owner respondents:
“March was another bad month for jobs, but maybe not quite as bad as February on Main Street. Seasonally adjusted, there was a decline in average employment per firm of .74 workers reported for the past three months by small business owners in March, large but down substantially from the loss of 1.0 employees per firm reported in February.
“This suggests that the job loss trend is slowing. Six percent (down three points) of the owners increased employment by an average of 3.4 (up 0.8 workers) workers per firm over the past three months, but 28 percent (up four points) reduced employment an average of 4.3 workers (down 0.7 workers) per firm (seasonally adjusted). A mixed picture, but the net was that job loss per firm (including those who did not change employment) declined substantially. The private sector is very weak, with the only job growth likely to come from education, health care and government.
“Ten percent (seasonally adjusted) reported unfilled job openings (down a point), and the percent of owners reporting that finding qualified labor was their top business problem fell to 3 percent – plenty of workers widely available as a result of the sharp contraction of employment that started in fourth quarter of 2008.
“Over the next three months, 12 percent plan to reduce employment (up two points), and 12 percent plan workforce increases (down 1 point), both numbers a bit worse than February.
“A record high 11 percent reported reducing worker compensation and a record low 11 percent reported raising worker compensation. This keeps a lid on labor costs for firms, but magnifies the impact of employment loss as some who are still working are getting lower pay. For those still working, rapid declines in prices are increasing real incomes (e.g. a dollar buys twice as much gas as it did 6 months ago).
“By year end, growth should be positive again, perhaps as strong as 4 percent (annual rate). Large pools of pent up demand are forming and will soon begin to be transformed into actual spending:
Here’s why real growth will be strong by year end:
1. A massive “oil tax cut” of $400 billion if oil prices stay below $50 all year.
2. A few million more cars purchased. The current annual rate (9 million) is well below historical scrap rates (about 14 million cars a year).
3. A few hundred thousand more new homes started. Housing starts have picked up in 2009 and should continue to grow. The excess supply is in Florida, California, Las Vegas and Phoenix (where prices are 40 percent off of peak). The rest of the country will need to start building.
4. Small businesses have postponed capital outlays at 35 year record rates. The longer the recession, the larger the pent up need to make these outlays remains.
5. Small businesses have liquidated inventory at a 35 year record pace (and large firms have liquidated as well). This is another pool of pent up demand that will feed orders with a vengeance once owners see the economy bottom.
6. Even with 10 percent unemployment, 9 out of 10 people who want a job have a job and will start spending more on deferred but desired activities.
7. And finally, some stimulus from Washington.
“March was another bad month for jobs, but maybe not quite as bad as February on Main Street. Seasonally adjusted, there was a decline in average employment per firm of .74 workers reported for the past three months by small business owners in March, large but down substantially from the loss of 1.0 employees per firm reported in February.
“This suggests that the job loss trend is slowing. Six percent (down three points) of the owners increased employment by an average of 3.4 (up 0.8 workers) workers per firm over the past three months, but 28 percent (up four points) reduced employment an average of 4.3 workers (down 0.7 workers) per firm (seasonally adjusted). A mixed picture, but the net was that job loss per firm (including those who did not change employment) declined substantially. The private sector is very weak, with the only job growth likely to come from education, health care and government.
“Ten percent (seasonally adjusted) reported unfilled job openings (down a point), and the percent of owners reporting that finding qualified labor was their top business problem fell to 3 percent – plenty of workers widely available as a result of the sharp contraction of employment that started in fourth quarter of 2008.
“Over the next three months, 12 percent plan to reduce employment (up two points), and 12 percent plan workforce increases (down 1 point), both numbers a bit worse than February.
“A record high 11 percent reported reducing worker compensation and a record low 11 percent reported raising worker compensation. This keeps a lid on labor costs for firms, but magnifies the impact of employment loss as some who are still working are getting lower pay. For those still working, rapid declines in prices are increasing real incomes (e.g. a dollar buys twice as much gas as it did 6 months ago).
“By year end, growth should be positive again, perhaps as strong as 4 percent (annual rate). Large pools of pent up demand are forming and will soon begin to be transformed into actual spending:
Here’s why real growth will be strong by year end:
1. A massive “oil tax cut” of $400 billion if oil prices stay below $50 all year.
2. A few million more cars purchased. The current annual rate (9 million) is well below historical scrap rates (about 14 million cars a year).
3. A few hundred thousand more new homes started. Housing starts have picked up in 2009 and should continue to grow. The excess supply is in Florida, California, Las Vegas and Phoenix (where prices are 40 percent off of peak). The rest of the country will need to start building.
4. Small businesses have postponed capital outlays at 35 year record rates. The longer the recession, the larger the pent up need to make these outlays remains.
5. Small businesses have liquidated inventory at a 35 year record pace (and large firms have liquidated as well). This is another pool of pent up demand that will feed orders with a vengeance once owners see the economy bottom.
6. Even with 10 percent unemployment, 9 out of 10 people who want a job have a job and will start spending more on deferred but desired activities.
7. And finally, some stimulus from Washington.