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Economy Woes and Blunders

July 17, 2008

I don’t get it:

In evaluating the market’s weaknesses, the McCain team found one ray of hope: small businesses that created nearly 250,000 jobs, even as the broad economy lost 400,000.

“That’s not overwhelming job growth, but it is a part of the economy that is hanging in there. We should take care of those small business,” Holtz-Eakin said.

A top concern for those companies is health care costs, which are often cost prohibitive for a small business, affecting its ability to attract the best workers. To ease the crunch, McCain settled on a reform plan that would give employees $2,500 in government grants to go buy their own coverage. source

Ummmmmm.. Okay, I’ve been involved in start-ups and small businesses and have watched one business grow from a start-up to a mid-sized company and this is bullshit.  It’s nice to see that McCain is talking about providing a $2500 tax grant for small businesses to go out and buy insurance…. but DUDE! that ain’t enough .. what does that amount to – insurance for one employee for six months to a year?

Okay but that’s really besides the point right now – the point is that small business still revolves around what is happening within mid-sized and large-sized business and while it is more apparent in the manufacturing and goods producing sectors – those sectors have an affect on the service sector as well…. here’s some data from ADP:

Employment in the service-providing sector of the economy declined 3,000, the first decline since November 2002. Employment in the goods-producing sector declined 76,000, with manufacturing employment falling 44,000, marking their nineteenth and twenty-second consecutive monthly declines, respectively.

Large businesses, defined as those with 500 or more workers, saw employment decline 51,000, while medium-size companies with between 50 and 499 workers declined by 35,000. Employment among small-size businesses, defined as those with fewer than 50 workers, advanced just 7,000 during the month.

Two sectors of the economy hit hardest by recent problems in mortgage markets have been residential construction and financial activities related to home sales and mortgage lending. Today’s report suggests no lessening of the recent strain on employment in these industries. In June, construction employment dropped 34,000. This was the nineteenth consecutive monthly decline, and brings the total decline in construction jobs since the peak in August of 2006 to 349,000. In addition, employment in financial
activities declined 3,000 during the month.

While small businesses may have gained 7,000 jobs in June, according to the NYT’s, it’s the smallest increase in almost six years.  Further yet, according to the ADP’s June report if we break down the small business gains and losses by sector small business looks like this:

Goods Producing: 27,000 lost jobs

Service Providing: 34,000 gained jobs

Manufacturing lost 44,000 jobs all together – I found no breakdown. 

In the goods producing sector, small businesses, medium sized businesses each lost 27,000 jobs and large businesses lost 22,000 jobs.

Even though the gains of small business in the service providing sector are 34,000 jobs while medium sized businesses lost 8,000 jobs and large businesses lost 29,000 jobs – is this absorbtion of jobs that medium and large sized businesses have found necessary to cut back on and will absorbtion of those jobs come at a hefty price to small business owners as the trickle down effect kicks in from the loss of manufacturing and goods producing jobs combined with consumer caution?

It’s not enough to point at a glimmer of hope which is already fading to make us feel better about the economy.

4 Comments leave one →
  1. July 19, 2008 7:47 am

    All we need to do is repeal any and all tariffs on foreign goods. This will lower the the inflated prices of those goods and the similar goods made in America. Since the market will then provide for competition foreign producers will try to lower the costs and prices of their exported products. In response to the lower prices on foreign goods in the US, bigger American companies (who are more influential in the market than the small businesses) will be forced to compete and lower their prices. Lower prices will increase demand for those products affected and this will allow for small businesses to obtain a portion of the market.

  2. July 19, 2008 5:34 pm

    “In response to the lower prices on foreign goods in the US, bigger American companies (who are more influential in the market than the small businesses) will be forced to compete and lower their prices.”

    Not likely – lowering and repealing the tariffs makes for prime conditions for these companies to do more outsourcing. Additionally, big businesses usually equal unions and payroll is one of the largest contributors to cost of goods – it’s not likely that unions are going to be willing to take pay decreases.

  3. July 20, 2008 12:01 am

    Unions’ rights should be thoroughly reevaluated, they’re given legal sanction to intimidate people who are willing to work. They organize people to coerce employers for excessive bonuses and perks which, in the long run, become such burdens that the employers have no choice but to hire less or lay people off. Unions should serve as a go between for workers and management, they should not have agenda’s of their own and they should not be allowed to use intimidation to keep non-union members (scabs) from working during a strike. How do you know if the wage increase that a union is pushing for is excessive? When others are willing to provide the same quality of work for the original wages.

    I say we should let owners of businesses outsource even pick up and leave whenever they please. This isn’t East Berlin.

  4. July 20, 2008 4:54 pm

    As for Unions – I agree.

    Let them pick up and leave – well, this is why we aren’t a pure Capitalist society and can never be. Keep letting them move out and take away jobs from the middle class and your going to end up with a problem .. socialism starts looking very attractive at that point.

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