Opening Day Keynote Address: Economic Overview
Sunday, October 18, 2009
“After The Fall:" What's Next For The Economy And The Financial Market After The 'Panic of '08'?"
What are the chances for a return to "normal" after the upheavals of the past year? Will the next economic recovery be as strong as it usually is after a deep recession? If not, then how high will unemployment go, and when will it peak? What are the implications for small businesses in, what is likely to be, a more challenging economic environment? How big a threat is inflation, and what will it mean for interest rates? And finally, what are the longer-tem implications of recent and prospective policy changes for the economy?
Gary Schlossberg
Vice President & Senior Economist
Wells Fargo Capital Management
Small Business Is Not "Small"
The SBA estimates that firms with fewer than 500 employees (98% of all employers, 90% have fewer than 20 employees) produce half of private GDP and employ a majority of private sector workers. The collective decisions of 6 million employers (and millions of self employed) have a profound impact on the fortunes of the economy. Currently, plans to invest in inventories, make capital outlays and create new jobs are at 35 year low levels. Although difficulties getting financing have played a role, there was no credit crunch on Main Street (served by 8,000 community banks). Credit is certainly harder to get in the recession than at the beginning of the expansion in 2003, but only 5% of owners cite financing as their #1 business problem (compared to as many as 37% in the 1980-82 period). After closing in on a record low level in March, small business owner optimism rebounded in April and again in May, indicating that a "bottom" was likely hit. Owners no longer fear the "depression" talk from Washington and Wall Street and, as usual, the private sector is healing the economy ("stimulus" has not played an important role to date). Government spending will be late to the party.
William Dunkelberg
Professor of Economics, College of Literature and Arts
Temple University