TWO WAYS OUT, NEITHER DESIRABLE
EXPECTING BETTER ECONOMY UNIVERSITY OF MICHIGAN, 2/17 REPUBLICANS 20 10 N E T
0 -10 -20
P C T
-30 -40 -50
INDEPENDENTS
DEMOCRATS
Source: University of Michigan
APRIL
18
2017+
'1 5
2008-2016
'1 2
'0 9
'0 6
NET % POLICIES ARE GOOD
'0 3
50 40 30 20 10 0 -10 -20 -30 -40 -50
'0 0
Percent of Consumers
RATING OF GOVERNMENT POLICY
SMALL BUSINESS FACTS • 90% OF ALL EMPLOYERS HAVE FEWER THAN 20 EMPLOYEES • 99% HAVE FEWER THAN 500 • PRODUCE ABOUT HALF OF THE PRIVATE GDP • EMPLOY 50% OF PRIVATE WORKER • PRODUCE 2/3RDS OF NEW JOBS
BIRTHS AND DEATHS - ENTERPRISES BIRTHS 000 270 260 250 240 230 220 210 200 190 180 170
DEATHS 000
??
BLS TABLE 8
15
12
'09
'06
'03
'00
SEASONALLY ADJUSTED
MOST IMPORTANT PROBLEMS 2016 1. RISING HEALTH CARE COST 2. COST OF REGULATIONS AND RED TAPE 3. FEDERAL TAXES ON BUSINESS INCOME 4. UNCERTAINTY ABOUT THE ECONOMY 5. TAX COMPLEXITY 6. UNCERTAINTY ABOUT GOVT POLICY 7. FREQUENT CHANGES IN THE TAX CODE 8. PROPERTY TAXES 9. STATE TAXES ON BUSINESS INCOME 10. FINDING QUALIFIED LABOR
SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) FIRST MONTH IN QUARTER
110
MAY-JUNE
105 100 95 90 85 80
76
79
82
85
88
91
94
97
'00 '03 '06 '09 12
15
18
SEASONALLY ADJUSTED INDEX COMPONENTS ANSWERED QUARTERLY SURVEYS BEFORE AFTER DEC 16 JAN 17 APR 17 JUL 17 OCT 17 JAN 18 APR 18 TUESDAY JOB CREATION 9 23 16 18 16 19 19 20 16 20 JOB OPENINGS 31 30 29 31 33 35 35 34 35 36 EXPECT EASIER CREDIT -4 -5 -6 -6 -4 -4 -5 -4 -6 -4 EXPECT BUS COND BETTER -6 38 50 50 38 37 32 41 30 33 EXPECT HIGHER REAL SALES 4 20 31 29 20 22 21 25 21 26 EARNINGS TREND HIGHER -25 -16 -14 -12 -9 -10 -13 -4 -1 -1 INVENTORY TOO LOW (NET) -3 -6 -3 -5 -3 -2 -5 -5 -4 0 PLAN INCREASE INVENTORY 4 4 4 2 3 5 4 3 1 6 GOOD TIME TO EXPAND 11 11 23 25 24 23 23 32 27 29 PLAN CAPITAL SPENDING 25 23 29 27 27 28 27 29 29 29 OPTIMISM INDEX
95.4
102.4
105.8
106.0
104.5
105.2
103.8
106.9
104.8
107.2
EXPECTATIONS FOR BUSINESS CONDITIONS IN 6 MONTHS (PCTMONTH “BETTER” - PCT “WORSE”) FIRST EACH QUARTER
MAY-JUNE
40 20 0 -20
18
'1 2 15
'0 6 '0 9
'0 0 '0 3
97
94
91
85
82
79
88
SEASONALLY ADJUSTED
-40
76
Percent of Firms
60
OUTLOOK FOR BUSINESS EXPANSION (PCT “NOW IS A GOOD TIME”)
FIRST MONTH EACH QUARTER
MAY-JUNE
“NO” for 8 YEARS
35 30 25 20 15 10 5
(SEASONALLY ADJUSTED)
18
15
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent of Firms
40
BAD TIME TO EXPAND DUE TO THE POLITICAL CLIMATE 45 40 35 30 25 20 15 10 5 0
MAY-JUNE
(SEASONALLY ADJUSTED)
16
'1 3
'1 0
'0 7
% OF THOSE SAYING “BAD TIME” '0 4
'0 1
Percent of Firms
QUARTERLY
REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3) FIRST MONTH EACH QUARTER
MAY-JUNE
30
RECESSION ENDS
10 0 -10 -20 -30
18
15
'0 0 '0 3 '0 6 '0 9 '1 2
97
94
91
88
82
79
85
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
-40
76
Percent of Firms
20
EARNINGS TRENDS: %”HIGHER” - %”LOWER” PAST QUARTER VS PRIOR QUARTER
FIRST MONTH EACH QUARTER
MAY-JUNE
0 -10 -20 -30 -40
18
15
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-50 76
Percent of Firms
10
EXPECTED REAL SALES FIRST MONTH EACH QUARTER
MAY-JUNE
50
30 20 10 0 -10 -20
18
15
'0 0 '0 3 '0 6 '0 9 '1 2
97
94
91
88
82
79
85
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
-30
76
Percent of Firms
40
UNFILLED JOB OPENINGS % WITH AT LEAST ONE UNFILLED OPENING FIRST MONTH EACH QUARTER
MAY-JUNE
40
Percent of Firms
35 30 25 20 15 10
15 17
12
'0 6 '0 9
'0 0 '0 3
97
94
91
88
85
82
79
76
5
C IF IC W O R SK K IL H SO LS I S C IA TO R L SK Y IL L W LE S A G GA E EX L EN PE A G/M C PP EA AT R H A N A TT C E IT U D D E R U G S
SP E
TYPICAL REASONS APPLICANT “NOT QUALIFIED” 2007 2017
30
25
20
15
10
5
0
JOB CREATION PLANS FIRST MONTH EACH QUARTER MAY-JUNE % PLAN INCREASE - % PLAN DECREASE 25
15 10 5 0 -5
15 17
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-10 76
Percent of Firms
20
MOST IMPORTANT PROBLEMS LABOR QUALITY
25 20 15 10 5
18
15
'1 2
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0 76
Percent of Firms
FIRST MONTH IN EACH QUARTER+MAY, JUNE
NET PERCENT OF OWNERS INCREASING EMPLOYMENT FIRST MONTH EACH QUARTER
MAY-JUNE
15
5 0 -5 -10 -15 -20
SEASONALLY ADJUSTED
18
15
'0 0 '0 3 '0 6 '0 9 '1 2
97
94
91
88
85
82
-25
79
Percent of Firms
10
PREDICTED AND ACTUAL UNEMPLOYMENT RATE ACTUAL
10 8 6
15
'12
'09
'06
'03
97 '00
94
91
88
85
82
79
4
76
Percent of Firms
PREDICTED
ACTUAL PRICE INCREASES SEASONALLY ADJUSTED FIRST MONTH EACH QUARTER
80
FIRST MONTH IN EACH QUARTER
40 20
-40
18
'0 0 '0 3 '0 6 '0 9 '1 2 15
94 97
88 91
-20
82 85
0
76 79
Percent of Firms
60
MAY-JUNE
ACTUAL CAPITAL OUTLAYS % SPENDING
75
%SPEND + LEASE
MAY-JUNE
Y2K
HOUSING 65 60
LEASING ADDED
55 50 45
18
'0 9 '1 2 15
LOW PRODUCTIVITY
'0 0 '0 3 '0 6
97
94
91
88
85
40
FIRST MONTH IN EACH QUARTER
82
Percent of Firms
70
PLANNED CAPITAL OUTLAYS (NEXT SIX MONTHS) FIRST MONTH EACH QUARTER
MAY-JUNE
45
35 30 25 20
'1 3 16
'0 7 '1 0
'0 1 '0 4
95 98
89 92
83 86
15
77 80
Percent of Firms
40
ECONOMIC OUTLOOK • ECONOMIC DRIVERS – REGULATORY TAX CUT – CORPORATE, INDIVIDUAL TAX CUTS – LARGE FISCAL STIMULUS
• EXPECTATIONS – ALL ABOUT THE FUTURE – INCREASED WILLINGNES TO SPEND – INCREASED WILLING TO INVEST (REAL)
• RISKS – MANY “NEW” ONES – – – – – –
TRADE CONFIDENCE IN GOVERNMENT INSTITUTIONS DOWN DEBT AND DEFICITS POLICY ERRORS: FED, FISCAL OVERCONFIDENCE, DEPENDENCE ON MODELS POLITICAL FRACTURING, INEQUALITY CONTEMPT
TRICKLE DOWN
ALWAYS FIND WAYS TO MAKE YOUR JOB INTERESTING