‘Is this the new normal?’
Before Bear Stearns and Lehman Brothers, the U.S. employment report did not qualify as front-page news and few had heard of the Thomson Reuters/University of Michigan consumer confidence index.
Today, there are no fewer than two dozen weekly, monthly and quarterly economic indicators measuring areas from the job and housing markets to the construction, manufacturing and retail industries.
These indices are watched not only by equities traders and financial industry insiders for the slightest indication of a change in the economic winds, but by casual investors, working-class moms and dads, and students.
While some of these indices and indicators are based on industry data and actual sales numbers, many are derived from surveys that brush just a small fraction of the total population.
The point is, they must be taken with a grain of salt. Week-to-week and month-to-month readings, while useful, can fall victim to an isolated event or a small sample size.
This month’s National Federation of Independent Business (NFIB) Small Business Optimism Index could very well be an outlier. But that doesn’t mean it should be ignored.
Earlier in December, the NFIB reported one of the worst business optimism readings in the survey’s history.
The December NFIB index dropped 5.6 points to 87.5, and while those numbers mean little without something to compare them against, consider this: Since the NFIB began conducting the survey on a monthly basis in 1986, only seven readings were lower than this December’s, with six of those seven coming in late 2008 or early 2009.
It would be easy to blame the drop in optimism on Hurricane Sandy, but numerous economists and government officials have said that the storm’s effect on the employment market was far less severe than initially expected.
In its U.S. employment report for November, released Dec. 7, the Bureau of Labor Statistics (BLS) stated, “Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.”
Here in Connecticut, Andy Condon, director of the office of research at the state Department of Labor, echoed the BLS sentiments, saying, “November’s job and unemployment numbers are encouraging, especially in the light of the challenges that Hurricane Sandy brought.”
In a Dec. 11 statement issued by the NFIB, the nonprofit’s chief economist, Bill Dunkelberg, said, “Something bad happened in November — and based on the NFIB survey data, it wasn’t merely Hurricane Sandy. The storm had a significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence. Nearly half of owners are now certain that things will be worse next year than they are now. Washington does not have the needs of small business in mind. Between the looming ‘fiscal cliff,’ the promise of higher health care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism. We are forced to ask: is this the new normal?”
Notably, the NFIB report was issued before a fiscal cliff compromise between House Speaker John Boehner and President Obama fell apart and Boehner was abandoned by his own rank-and-file.
Hard work and difficult choices got businesses — small businesses in particular — through the recession. But according to economists and financial analysts, businesses have maxed out potential efficiencies and are facing the distinct possibility of hiring freezes or layoffs should Congress fail to move beyond the massive filibuster that has engulfed the capital.
In the new year and the new term, Congress and the Obama administration must resolve to ensure that action, compromise and sacrifice for the common good — rather than dysfunction and sticking to the party line — become the new normal.
And should they fail, business owners and consumers alike should resolve to hold them accountable.