SOME GOOD, SOME BAD, ON

AVERAGE A WEAK REPORT FROM

SMALL BUSINESS
NATIONAL FEDERATION OF INDEPENDENT BUSINESS
William Dunkelberg, (610) 209-2955
(Based on 662 respondents to the JUNE survey of a random sample of
NFIB’s member firms, surveyed through 6/30/13)

NFIB owners were not able to contribute to job growth again this month, with the
average increase in employment coming in at a negative 0.09 workers per firm,
not a whole lot different from zero, but a positive sign would have felt better.
Eleven percent of the owners (up 2 points) reported adding an average of 3.6
workers per firm over the past few months. Offsetting that, 12 percent reduced
employment (unchanged) an average of 4.3 workers (seasonally adjusted),
producing a seasonally adjusted gain of negative 0.09 workers per firm overall.
The remaining 77 percent of owners made no net change in employment. Fifty-
three percent of the owners hired or tried to hire in the last three months and 41
percent (77 percent of those trying to hire or hiring) reported few or no qualified
applicants for open positions. A higher percentage of the owners hired, but
those that reduced employment made cuts large enough to put employment
growth among existing firms in the red.
A net 16 percent reported raising compensation, 2 points below May, which was
the highest reading since September, 2008, just before the economy plunged
into deep recession. The average percent raising compensation from 2003 to
that point was 23 percent. Aggregate disposable income is increasing at a
snail’s pace, because jobs are increasing slowly and because those that are
working are not seeing meaningful increases in pay. For many, increases in the
cost of benefits, primarily health care, are consuming any justifiable increases in
overall pay.

Nineteen percent of all owners reported job openings they could not fill in the
current period (unchanged). Twelve percent reported using temporary workers,
little changed over the past 10 years. The health care law provides incentives to
increase the use of temporary and part-time workers, but this indicator has not
registered a trend toward the use of more temps.

Job creation plans rose 2 points to a net 7 percent planning to increase total
employment, better, but still a weak reading. Not seasonally adjusted, 14 percent
plan to increase employment at their firm (down 2 points), and 6 percent plan
reductions (up 1 point). The improvement is welcome, but leaves plans at a level
too low to promise many new jobs in the future.

The revision of first quarter GDP growth to an anemic 1.8% at an annual rate
confirms that the economy is growing at a very slow pace, not enough to produce
many new jobs. The largest contributor to the negative revision was consumer
spending, in particular to spending on services, which account for about 70
percent of consumer spending. This sector is very labor intensive and a revival
of spending there would certainly improve job creation. Housing is getting better
but running into some supply side constraints. Nearly half the builders complain
that they are having trouble assembling work crews to build new houses while
new home sales are pressing against supply. House prices are rising at double
digit rates. There could be more jobs.

In the meantime, uncertainty reigns supreme, who knows what labor will cost or
when or what firm size will have to comply with which rules – HHS is still writing
them. The government’s delay for compliance among those with 50 employees
or more is a political move, fearing the bad press that might occur prior to
elections. It is also clear that the government is not prepared to implement this.
Really, a group of people, most with little or no private sector experience,
decided to restructure 15 percent of GDP. This is what we expected, a rolling
disaster – exemptions, special deals, delays, confusion, contradictory
regulations. It’s a bad situation in Washington, scandals, no budget deals, no
dealing with the big problems, our own government agencies taking advantage of
us. Not a good time to bet on the future by hiring lots of workers with uncertain
cost. The NFIB June survey confirms that.