Don’t Worry, I’m Not on the Cover

In my role at the SBA, I am often quoted in the media.  Last year, I was interviewed by Joe Kita for Men’s Health magazine.  The interview finally appears in the July/August issue in an article titled “You, Inc.” The bulk of the article highlights various entrepreneurs, showing how they have become successful “investing in themselves.”  There is one quote from me toward the beginning.

I remember when this interview took place.  Some of my colleagues were teasing me about being in Men’s Health. I told them not to worry.  They were not interested in seeing an economist with his shirt off….

Global Race for the Cure

On Saturday, Charlotte and walked in the Susan G. Komen Global Race for the Cure in Washington, DC.  This is the second year that we have walked it as part of Team Endurance, which was set up in memory of my late wife Laura by her friend Darlene Duffett.  A few of us wore the shirts that Darlene designed last year, complete with the Bible verse that Laura loved so much (and that I put on her gravestone marker):

“I have fought a good fight, I have finished the race, and I have remained faithful.  And now, the prize awaits me….” (2 Timothy 4:7-8)

This year, though, we ended up merging with another team, Propellin’ for Ellen, which was set up by members of our church (especially our friend Amy Allen) for Ellen Frazier, a church employee who is battling breast cancer.  Five of the six members of the pastoral staff joined us in the walk, and combined, our two teams raised over $4,000!

For me, the walk signified two things.  First, it reminded me of how wonderful our church family and friends have been to us over the past few years.  It is amazing to know how much people will do to support you when you really need them.  We learned that during Laura’s breast cancer, and Ellen Frazier is experiencing it during her current battle.

Second, when you see the mass of people walking the 5 kilometers through the heart of DC, you quickly get a sense of the enormity of it all.  Breast cancer affects so many people, from so many different walks of life.  The thousands of teams that woke up early (many of whom would have probably preferred staying in bed if it were not for supporting this important cause) had their own “Lauras” and “Ellens” to love, support, or remember, and they all wanted a cure for this dreaded disease.

Overall, it was the perfect day.  The weather was pleasant, and we all felt like we were doing something positive.  Charlotte, of course, is still too young to fully understand the significance of it all, but I am glad that she was out there, walking along with the rest of us.  One day, she will learn to appreciate the need to eradicate breast cancer, and hopefully, a cure can be found in her lifetime.  After all, that is really why we walk.

Update (6/9): This entry is now cross-posted on the Fight Pink website.  It was my friend Stacy Martello who had encouraged me to blog about the Global Race for the Cure.  Thanks for the kind words, Stacy.

Glimmers of Hope, Part II

Last month, I wrote a blog post about some of the “glimmers of hope” in the economy, echoing statements made by the President.  Since then, we have seen more evidence that the economy has turned some sort of corner.  That is not to suggest that things are terrific, but it does seem to indicate that perhaps the bottom has passed.  Here are some examples:

• A majority of economists surveyed by the National Association for Business Economics (NABE) see the economy turning around by year’s end, albeit with slower growth.  (NABE members can read the full survey here.)  This, of course, is consistent with statements made by Federal Reserve Chairman Ben Bernanke earlier in the month.
• The U.S. Small Business Administration’s lending programs, 7(a) and 504 loans, which have been down drastically in terms of year-to-year figures, have both risen 25 percent since March 16, reflecting a turnaround in their fate.
• Several surveys have shown increases in overall optimism.  We have seen rises in the National Federation of Independent Business’s index of small business optimism and the University of Michigan’s consumer sentiment survey, for instance.  Each of these indices, however, are well below their traditional averages.
• The Dow Jones Industrial Average was up 4 percent in the month of May, something that we all like to see, especially after the 54.5 percent fall we experienced when the market hit bottom in early March.

True, there are also some worrying signs (perhaps for another post), but it is nice to receive some good news for a change.

Economic Challenges Remain

Today, we released the newest update to the Quarterly Indicators: The Economy and Small Business for the first quarter of 2009.  The Bureau of Labor Statistics also released the April employment numbers today, which were sobering.  The U.S. economy lost 539,000 jobs in the month of April, but more importantly, this was the sixteenth consecutive month of job losses.  Since this recession began in December 2007, the U.S. has lost 5.7 million nonfarm payroll jobs!  In that time frame, the unemployment rate has gone from 5.0 to 8.9 percent.  Worse yet, these numbers are expected to get worse before they get better.  (The positive spin from the day was that the 539,000 was better than in previous months, perhaps suggesting that the steep rate of decline has begun to slow down.)

Real gross domestic product in the first quarter declined by 6.1 percent, following the 6.3 percent fall in the previous quarter.  The worst damage came from sharp drops in investment (especially the non-residential sector), exports, and imports.  The global recession has impacted the overall volume of international trade.  This reverses the stellar export growth that we had been experiencing for several years up until the fourth quarter of 2008.  Likewise, non-residential construction had been quite resilient (even as the residential sector collapsed) until the second half of 2008.  The good news is that consumption increased an annualized 2.2 percent in the first quarter, showing that the consumer might be moving back into the market.

Despite this increase in spending, both the consumer and the small business sector remain very pessimistic about the overall economy.  Small business owners cite poor sales and access to credit as the biggest challenges that they face.  However, the most recent American Express Small Business Monitor survey shows that 37 percent of small businesses see growth opportunities in the next six months, with 28 percent planning to hire employees in the coming months.  This shows that entrepreneurs are able to spot opportunities even in uncertain times, and it perhaps suggests that better times might be coming.  Earlier in the week, Federal Reserve Chairman Ben Bernanke testified in Congress that he is hopeful that the economy will improve by year’s end.  Let’s hope that he and the respondents to the American Express survey are correct.

Small Business “Glimmers of Hope”?

In a couple weeks, we will release the next edition of our quarterly indicators for small business.  Much of that document will hinge on what we learn from the release of the first quarter 2009 real gross domestic product (GDP) figures, which will be released on April 29.  Given the severity of the recession, I would not expect for these numbers to be good.  The National Association of Business Economists (NABE) earlier this week released an industry survey showing that 93 percent of economists felt that real GDP would decline for the year as a whole.  With that said, the survey also suggests that declines in the economy are “abating.”  According to Sara Johnson of IHS Global Insight, “Key indicators — industry demand, employment, capital spending, and profitability — are still declining, but the breadth of the decline is narrowing.”

What does that mean for small businesses?  Over the past few weeks, we have seen some mixed surveys on the topic.   The April survey of small business owners from the National Federation of Independent Businesses continues to show a high degree of pessimism.  Its monthly optimism index is not far from its all-time low, set in 1980, and this has translated into anxiousness on the part of these owners to expand their business or (re)hire new workers.  In fact, their hiring intentions have become increasingly more negative since November, mirroring the decline in employment nationally.  We have lost 5.1 million jobs in the U.S. over the past fifteen months, and we can assume that a sizable portion of that was from small firms. 

Nonetheless, there are a couple surveys out which suggest that there might be some “glimmers of hope” over the course of this year.  Last month, the University of Maryland’s business school and Network Solutions introduced the Small Business Success Index.  According to its respondents, 67 percent were planning to invest in their businesses this year, bucking the recession; moreover, the small business owners in this survey tended to be more optimistic relative to the NFIB survey with nearly half suggesting that the economy will remain unchanged or improve in 2009.  This finding can also be found in the American Express Open Small Business Monitor, which finds that four out of ten entrepreneurs are both optimistic about the economy this year and feel that the economy provides opportunities for their businesses.  That is not to suggest that there have not been hardships.  Sizable portions of its respondents have had to take drastic steps such as instituting pay and hiring freezes and other ways of cutting costs. 

Nonetheless, despite the cautiousness in the down economy, there is also cautious optimism.  I was personally struck by this finding in the American Express survey.  There were 37 percent who said that the economy had presented them with opportunities.  Moreover, nearly “all of these glass-half-full entrepreneurs (92%) say that managing through the recession has made them a better business owner, compared to 77% overall.”  That is a pretty impressive finding, and one that suggests that even in tough times, entrepreneurs are able to adjust to make the current environment work for them.  That should give us all a “glimmer of hope” for our future.

Note: Only NABE members will be able to read the PDF version of its industry survey.

Happy 5th Anniversary, Laura!

Today would have been Laura and my fifth anniversary.  We were married in St. Thomas on Easter Monday, April 12, 2004.

Laura, we are thinking of you today.  (I look so young in this picture.)

National Race for the Cure

On June 6, I will once again walk in the Susan G. Komen National Race for the Cure as part of Team Endurance, which is again organized by my friend Darlene Duffett.  Click here to visit my personal page.  It is a great time, for a great cause. 

Darlene named the group Team Endurance based on my late wife Laura’s spirit during her battle with cancer; her favorite Bible passage (and the one which is on her tombstone) was: “I have fought the good fight, I have finished the race, I have kept the faith” (2 Timothy 4:7).  Hopefully, you will be able to join us.

Update: I have been told that this race is now called the Global Race for the Cure, starting this year.  Sorry for the error.

Global Innovation Forum

Earlier today, I participated in a forum at Howard University called “Securing America’s Future: Innovation Jobs for the Middle Class.”  This event was organized by the Global Innovation Forum and the Institute for Entrepreneurship, Leadership, and Innovation (ELI Institute) at Howard’s College of Business.  The keynote speaker was the new U.S. Trade Representative Ron Kirk, who spoke about the importance of trade to our national economy.  I was particularly pleased to hear him discuss an appreciation of free trade and of the role that small businesses play in exporting.  (See my chapter on small businesses and trade in the most recent Small Business Economy.)

The goal of this forum, though, was to discuss policy solutions that will drive more innovation, entreprneurship, and trade in our economy.  The end goal, of course, is to make our economy stronger, producing more jobs for Americans.  Overall, it was a good (first) meeting, where many people presented some good ideas.  It will be interesting to see how the organizers frame these comments into workable proposals for the government to act on, and we will undoubtedly be asked to follow-up.

Regular followers of this blog have noticed a trend.  I have written several times over the past few months about innovation and entrepreneurship.  That is no accident.  A wide range of “thinkers” have all come to the (correct) conclusion that in order to remain competitive globally and to grow our economy in any recovery, we will need to be innovative and entrepreneurial, and we will need to be proactive in exploring new overseas markets.

Effective Tax Rates Paid by Small Businesses

Today, the Office of Advocacy released a study on estimated effective federal tax rates paid by small businesses by Quantria Strategies.  This report simulates these rates using primarily public Statistics of Income data from the Internal Revenue Service.  Its timing, of course, makes it helpful to the overall debate going on in the Congress regarding the FY 2010 fiscal budget.  Indeed, several Congressional staffers saw embargoed copies of this report – on both sides of the political spectrum – and found it helpful.

In general, the authors find that the average effective tax rate for small businesses is 19.8 percent.   By legal forms of organization, the breakdown is:

• Small nonfarm sole proprietors: 13.3 percent.
• Small partnerships: 23.6 percent.
• Small S corporations: 26.9 percent.

While the study does give an effective tax rate for C corporations, it is not comparable to the other figures due to limitations in the analysis.  One thing to note is that, as averages, these figures include every business making positive income; this somewhat skews the sole proprietor average.  In general, the effective tax rates show a high degree of progressivity in the tax code, with businesses earning more paying a higher effective tax rate.   For instance, sole proprietors earning less than $10,000 have an effective tax rate of 8.1 pecent versus those firms making $200,000 or more, which pay 23.9 percent in taxes.  The study also does a good job of breaking these figures down by major industry classification and by size of assets.

Hopefully, you will enjoy this study.  (If you want to see a shorter version, see the Research Summary.)  I suppose that it will be quoted often in the coming weeks and months in policy debates.

Radio Podcast – Jim Blasingame Show

Earlier today, I appeared on Jim Blasingame’s radio program, The Small Business Advocate, to discuss the current state of the small business economy.  Here is a link to the podcast of my appearance.