Category Archives: Economy

Only One Third of Census Bureau Number for Small Businesses are Truly Small Businesses

Of the 32,570,855 small businesses the US Census Bureau says are small businesses, only about one-third of them are what most people think of when they think of a small business, one that has employees.

Its even worse than that. The 76.2% of small businesses that do not have employees only account for 4% of sales of all small businesses. So what is the explanation? Who are these non-employers?

According to Alan Grundy of the Census Bureau, they are

“self-employed individuals operating a very small unincorporated business which may or may not be the owner’s principal source of income.”

Simply put, these “small business owners” are not business owners at all.

A lot of them are people making some money “on the side.” Maybe they sell a few thousand dollars a year of stuff on Etsy. Or a student that babysits to support his education. Or a professional that occasionally rents out his apartment on Airbnb. These people most likely have a full-time job with health insurance and other benefits. They are certainly not entrepreneurs. They are just earning a few extra dollars that they report on Schedule C.

Then there are other types of businesses skewing the numbers. For example, a person who owns ten rental properties, each one with its own separate tax return. Yes, he is a real business owner, but of one business, not ten. There can also be several partners that own one business, but each one files his own tax return.

Another source of the inflated figures are “independents.” These are also real businesses, but without employees. Many of these “businesses” are the main livelihood of service providers such as stockbrokers, cleaners, delivery people. A hairstylist who is independent and just works in someone else’s salon; an accountant or lawyer who works from home; or a consultant or real estate agent who works from a work-share space are all small businesses without employees. The owner and worker is the same person.

A more accurate way of knowing if someone is a small business owner is to ask whether he or she has employees. Real employers sign paychecks, have vacation policies, break rooms, hires and fires.
More precisely, there are closer to 7.8 million true small businesses in the USA. The rest of the 32 million are just people reporting extra income on their tax returns.

Limited Legal Immigration is Hurting US Business

Donald Trump and Mike Pence at Executive Order Signing Ceremony Buy American Hire American
President Donald Trump displays his signed Executive Order.

The news is full of stories about the crack down on illegal immigration to the US by the Trump administration, but there is also a powerful effort going on to reduce the number of legal foreign workers, essential for many US businesses, coming into the country.

More work visas are being denied; applicants are asked for more personal information; and approvals are being delayed more often than just a year ago. This slow strangulation of the flow of legal foreign workers hurts hospitals, hotels, tech companies and other business that rely on them and which now are having trouble filling their available jobs.

Without the foreign workers, domestic workers must work more to cover, or businesses are forced to cut back on their services. Corporate leaders are worried what the long-term effect will be on their companies of the best and the brightest from outside the US end up going to Canada or elsewhere, where engineers and programmers are welcomed with open arms.

In April 2017 Trump signed an executive order called “Buy American and Hire American,” which directed the government to “rigorously enforce” immigration laws. The order went into effect without much notice or fanfare.

Not long after the president supported a law that would reduce the number of legal immigrants in half. Introduced by two Republican senators, Mr. Tom Cotton of Arkansas and Mr. David Perdue of Georgia, the bill has not gone anywhere, yet. A few lawmakers are saying that the president has been using administrative, bureaucratic means to curtail immigration, since actual legislation to achieve that goal has been stalled.

“If they want to have a proposal on immigration, they should send it to Congress,” said Democratic Representative Ro Khanna, whose district includes parts of Silicon Valley. “The administration should engage in that conversation. To unilaterally and without any accountability change what Congress has authorized is not democratic.”

Business Economists Feel Optimistic About the Future

After tax cuts and increased spending measures have passed through Congress, business economists are expressing optimism that there will be accelerated economic growth over the next two years. This is according to a survey conducted by the National Association for Business Economics. NABE projects that the economy will grow 2.9 percent this year, the best growth in the past three years. Just three months ago NABE was predicting only 2.5 percent growth.

NABE updated their prediction after Trump’s $1.5 billion tax cut passed through Congress successfully and legislatures agreed to raise the budget for military and domestic programs by $300 billion over the coming two years.

NABE forecasters believe that the tax cut and spending increase will increase economic growth by 0.45 percent this year, and 0.3 percent next year.

“In large part, the increase in growth prospects appears related to federal fiscal policies,” said David Altig, chairman of the NABE forecasting group and the director of research for the Federal Reserve Bank of Atlanta.

Trump officials claim that the administration’s economic policies will speed growth to annual rates of at least 3 percent. Most economists doubt this is possible. Many analysts believe that economic growth is more likely to be about 2 percent per year for the next ten years.

Kentucky A Surprisingly Good Place to do Business

Photo courtesy Andreas Faessler.

Many US states are benefiting from the upward movement of the economy and a renewed improvement in investments. States that want to maximize the rewards of this economic upturn are working hard to attract both foreign and domestic money.

One state that is doing its utmost to attract investment is Kentucky, a place in middle America that lost a lot of jobs in coal and manufacturing over the past 20 years. This year that state is seeing a record amount of investments. Officials announced that Kentucky invested $9.3 billion in corporate investment last year, leading to the creation of 17,000 new jobs, the most since the year 2000.

The state is confident it can continue to create jobs in the future. It has a skilled workforce and a growing business climate, according to Governor Matt Bevin.

“We have a great workforce. I have invested $250 million in workforce development in the last two years,” Bevin said.

Best US States for Economic Growth

Every year US News & World Report assesses the 50 US states for a variety of characteristics such as health care, education, economy, opportunity, infrastructure, crime, fiscal stability and overall quality of life.

Several years have passed since the US fell into the worst recession since the Great Depression of the 1930s. From 2007 to 2009 unemployment climbed past 10% at its worst, with some states doing even more poorly. Now unemployment stands at about 5% nationwide, although the recovery is not experienced in every state equally. The US News & World Report survey shows some states have only 2% unemployment while there are other states with 7%.

Growth of the US economy, as measured by the gross domestic product, was 2.6% annualized in 4Q of 2017, below that of the previous quarter. This number is also lower than the annual average from 1947 through 2017. There are political leaders who would like to see GDP reach 4%.

The following states did the best in the rankings for 2017:

1. Colorado: Ranked 4th for growth, 3rd for employment and 3rd for business environment.
2. Utah: Sixth for growth, 4th employment and 5th for business environment.
3. Washington: First for growth, 24th for employment, and 4th for business.
4. California: Fifth for growth, 29th for employment, and 1st for business environment.
5. Florida: Second for growth, 32nd for employment, and 7th for business environment.