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Economy

Small Business Optimism Index Remains Historically High, Uncertainty Rose Significantly

Employees have short meeting in the warehouse to check business inventory levels of goods. First in first out. (Photo: AdobeStock)
Employees have short meeting in the warehouse to check business inventory levels of goods. First in first out. (Photo: AdobeStock)

Small business optimism declined modestly in June, declining 1.7 points to 103.3 and missing the consensus forecast. The Uncertainty Index rose significantly, rising seven points to the highest level since March 2017.

IndicatorPriorConsensus ForecastForecast RangeResult
NFIB Small Business Index105.0 104.0 102.5  to 105.0 103.3 

“Last month, small business owners curbed spending, sales expectations and profits both fell, and the outlook for expansion dampened,” said NFIB President and CEO Juanita D. Duggan. “When you add difficulty finding qualified workers and harmful state level laws and regulations, you’re left with a volatile mix where uncertainty has increased to levels not seen in more than two years.”

While the NFIB Small Business Optimism Index remains historically high, six components fell, three improved, and one was unchanged.

“As expectations for sales gains and the general business environment faded, uncertainty levels increased,” said NFIB Chief Economist William Dunkelberg. “Still, job openings and plans to create jobs remain historically very strong, and while it’s not as ‘hot’ as May, Main Street is still running strong.”

Capital spending plans and actual spending declined in June. Twenty-six percent (26%) plan capital outlays in the next few months, which is down 4 points, suggesting uncertainty. Fifty-four percent (54%) reported capital outlays, down 10 points from May.

The inventory component, which has been a boost to first (Q1) and second quarter gross domestic product (GDP), strengthened. Owners report existing inventory stocks were lean and that they plan to add to them.

But sales and earnings eased. Expected credit conditions remained favorable, though more owners expect credit conditions to tighten rather than ease by a two-to-one margin. Most expect no change.

“Contextually, owners expecting higher real sales volumes averaged a net negative three percent in the 12 months leading up to November 2016, making the current reading look relatively good, but not as good as the 31 percent reading in May of last year,” Dunkelberg added. “The economy is still advancing at a solid pace, but it is expected to be a slower pace than the first quarter.”

Meanwhile, the skills gap persists and continues to be the top obstacle for job creation, according to NFIB’s monthly jobs report.

Fifty-eight percent (58%) of small business owners report hiring or trying to hire, down 4 points, but 86% of those trying to hire reported few or no qualified applicants for the positions they were trying to fill.

Twenty-one percent of all owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem.

Twelve percent (12%) of owners reported increasing employment an average of 4.3 workers per firm, and 7% reduced employment an average of 4.6 workers per firm (seasonally adjusted)

Small business optimism declined modestly in June,

Economy

Lower-Income Workers’ Wages Growing at Faster Pace

Wages, or average hourly earnings (AHEs), rose by more than 3% on an annual basis for the 11th consecutive month in June. The Labor Department reported even larger gains for lower-income workers.

The Bureau of Labor Statistics (BLS) monthly jobs report — or, the Employment Situation — showed wages for all employees on private nonfarm payrolls rose by 6 cents to $27.90 in June.

That’s after a 9-cent gain in May. Non-supervisory and production workers saw wage growth gain 3.4% over the past 12 months.

“The June jobs report surpassed expectations adding 224,000 jobs to the economy, totaling 5.6 million jobs created since January 2017,” Secretary of Labor Alexander Acosta said. “This report included other good news as wages increased at or above 3% year over year for 11 straight months.”

In the fourth quarter (Q4) 2018, wages posted the biggest gain (3.1%) since Q3 2008, hitting that mark for the first time since the Great Recession.

It has held above 3% ever since.

“We continue to look for increasing investment into America’s workforce through the Pledge to America’s Workers, USMCA, and apprenticeship expansion,” Secretary Acosta added.

While the unemployment rate (chart) ticked up 0.1% to 3.7% in June, it was due to 335,000 Americans entering the labor force. That figure exceeds population growth by 158,000.

The unemployment rate for Asian Americans fell to a new record low at 2.1%, and the overall unemployment rate has remained at or below 4% for 16 consecutive months.

The labor force participation rate (chart) ticked slightly higher from 62.8% to 62.9%, while the employment-population ratio was 60.6% for the fourth month in a row.

Asian labor force participation rose 0.6% to 63.6%, Hispanics rose 0.2% to 66.4% and Whites ticked slightly higher by 0.1% to 62.9%.

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Wages have increased by more than a

Economy

Wages Continued to Exceed 3% for 11th Straight Month

Series with themes reflecting a certain billionaire politician who won the 2016 presidential election touting a very strong labor market. (Photo: AdobeStock)
Series with themes reflecting a certain billionaire politician who won the 2016 presidential election touting a very strong labor market. (Photo: AdobeStock)

The U.S. economy added 224,000 jobs, the unemployment rate ticked higher to 3.7% and wages rose solidly, according to the jobs report for June. The unemployment rate for Asian Americans fell to a new record low at 2.1%.

Employment Situation (June)PriorConsensusConsensus RangeResult
Nonfarm Payrolls – M/M ∆75,000 165,000 135,000  to 205,000224,000
Unemployment – Rate3.6%3.6%3.5% to 3.8%3.7%
Private Payrolls – M/M ∆90,000 149,000 135,000  to 180,000 191,000
Manufacturing Payrolls – M/M ∆3,000 2,000 -2,000  to 6,000 17,000
Labor Force Participation – Rate62.8%62.8%62.7% to 63.0%62.9%
Average Hourly Earnings – M/M ∆0.2%0.3%0.2% to 0.4%0.2%
Average Hourly Earnings – Y/Y ∆3.1%3.2%3.1% to 3.3%3.1%
Average Workweek – All34.4 hrs34.5 hrs34.4 hrs to 34.5 hrs34.4 hrs

The labor force participation rate (chart) ticked slightly higher from 62.8% to 62.9%, while the employment-population ratio was 60.6% for the fourth month in a row.

Manufacturing employment kicked back into gear, gaining +17,000 . in June after 4 months of little change. Manufacturing employment has averaged 8,000 per month, compared with an average of 22,000 in 2018.

Construction employment continued a solid upward trend, adding 21,000 in June. That’s on par with the average monthly gain over the prior 12 months.

In June, wages, or average hourly earnings (AHEs), for all employees on private nonfarm payrolls rose by 6 cents to $27.90. That’s after a 9-cent gain in May.

Over the past 12 months, average hourly earnings (chart) have increased by 3.1%. Wage growth has exceeded 3% for the 11th straight month.

Average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $23.43 in June.

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Live

Watch Live: Salute to America Independence Day celebration in Washington, D.C., on July 4, 2019. President Donald Trump will speak at the Lincoln Memorial.

UPDATE: President Trump tweeted ahead of the speech.

Presidential Message on the 243rd Anniversary of the Adoption of the Declaration of Independence

Two hundred forty-three years ago today, our Founding Fathers, gathered in Philadelphia, adopted the Declaration of Independence and cast off the shackles of tyranny.  They boldly proclaimed the inherent truth that each individual has unalienable rights that come from our Creator, and that among them are the rights to life, liberty, and the pursuit of happiness.  As we celebrate these rights upon which our Nation was built, we also recognize the courageous men and women of our Armed Forces who have valiantly defended them.

Four days after the Declaration of Independence was signed, the Liberty Bell echoed through the streets and alleyways of Philadelphia, calling citizens of the city to the first public reading of the celebrated document.  Today, freedom continues to ring proudly throughout the United States and around the world because of the service and sacrifice of our Nation’s veterans and military members, who have fearlessly answered the call of duty.  From the Battles of Lexington and Concord to the wars in Afghanistan and Iraq, the members of our Armed Forces have demonstrated remarkable patriotism and unrivaled courage.

The ideals and values of the American Revolution gave birth to a just and virtuous republic that has both fostered and been sustained by a people animated by courage, faith, and love.  Countless contributions from statesmen, businessmen, philanthropists, educators, and other Americans from coast to coast have shaped our communities and inspired generation after generation to preserve and advance liberty, equality, and the American dream.

In 1815, reflecting on the character of America, Thomas Jefferson wrote to his friend—and hero of the Revolutionary War—Major General Marquis de Lafayette: “The cement of this union is in the heart blood of every American.”  These words are still true today, as the unmatched patriotism of Americans continues to bind us as a Nation.  Looking to the future, we resolve to remain steadfast in our commitment to safeguarding liberty for ourselves and future Americans.

Melania joins me in sending our best wishes to all Americans celebrating Independence Day.  Happy Fourth of July!

Watch Live: Salute to America Independence Day

Companies

News Organizations Lead Media Industry in Layoffs, 2019 YTD Surpasses 2018

Graphic concept for the media industry depicting an anchorman woman with a city background delivering a fake breaking news tv broadcast for a news organization. (Photo: AdobeStock)
Graphic concept for the media industry depicting an anchorman woman with a city background delivering a fake breaking news tv broadcast for a news organization. (Photo: AdobeStock)

Job cuts in the media industry continue to hit news organizations the hardest in June and the year-to-date (YTD) surpassed the total for 2018, according to the Challenger Job-Cut Report.

IndustryJune 2018May 2019June 2019YTD 2018YTD 2019
Media2351,1205436,4357,775

Through June 2019, Challenger has tracked 7,775 media industry cuts, including more than 3,600 at news outlets.

By comparison, there were 6,435 media cuts through June 2018. Last year, a total 15,474 job cuts were tracked in media, of which 11,878 came from news organizations, according to Challenger tracking.

The biggest single job cut tracked for a news organization in the media industry for June came from the closing of the Youngstown Vindicator in Ohio. It cost 144 employees and an estimated 250 carriers their jobs.

On May 6, reports circulated that CNN would lay off as many as 300 jobs. The organization denied the reports, though ultimately admitted more than 100 employees took buyouts.

The organization claimed they were not related to layoffs.

However, the “buyouts” came as AT&T (T) — which owns CNN — struggles to restructure billions of dollars in debt and arrest falling ratings.

Ratings for CNN fell again in April following the collapse of the Russia collusion narrative, in which they invested heavily. Ratings declined 26% from the same month a year ago to the lowest level since October 2015.

Prime-time and daytime viewership was just 761,000 and 553,000, respectively.

That decline came after the network saw its worst month in three years. In April, “Cuomo Primetime” saw its worst demographic viewership since it debuted in June 2018.

CNN is not alone. As Business Insider reported in early June, nearly 3,000 people at largely leftwing news organizations have lost their jobs.

The McClatchy Co. offered early retirement buyouts to 450 employees and BuzzFeed announced 200 layoffs. Verizon (VZ), announced a combined 800 layoffs at Yahoo! News, AOL and The Huffington Post.

Correction: The original version of the article stated The McClatchy Co. announced 450 layoffs. The company offered voluntary buyouts as part of a “functional realignment”. The article has been updated to reflect this error.

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Economy

ISM Non-Manufacturing Index (NMI) Posts Sustainable Strength in June

A Walmart employee who serves as a "customer host," walks in front of the customer service desk at a Walmart super-center location in Gainesville, Florida. (Photo: Laura Baris/People's Pundit Daily/PPD)
A Walmart employee who serves as a “customer host,” walks in front of the customer service desk at a Walmart super-center location in Gainesville, Florida. (Photo: Laura Baris/People’s Pundit Daily/PPD)

The Institute for Supply Management (ISM) Non-Manufacturing Index (NMI) indicated solid and sustainable growth for the U.S. service sector in June. The NMI came in at a solid 55.1%, though was 1.8 percentage points lower than the May reading of 56.9%.

IndicatorPriorConsensus ForecastForecast RangeResult
NMI56.9 55.8 54.2 — 57.0 55.1

Although the non-manufacturing sector’s growth rate dipped in June, the sector continues to reflect strength,” Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee, said.

This is the lowest reading since July 2017, when it registered 55.1%. However, that indicates solid growth for the U.S. service sector without showing signs of overheating.

The New Orders Index came in at a strong 55.8%, though 2.8 percentage points lower than the reading of 58.6% in May. The Employment Index also fell 3.1 percentage points in June to 55% from the May reading of 58.1%.

But those are all solid and sustainable readings.

“The comments from the respondents reflect mixed sentiment about business conditions and the overall economy. A degree of uncertainty exists due to trade and tariffs.”

The 16 non-manufacturing industries reporting growth in June — listed in order — are:

  • Real Estate, Rental & Leasing;
  • Other Services;
  • Finance & Insurance;
  • Accommodation & Food Services;
  • Health Care & Social Assistance;
  • Mining;
  • Construction;
  • Educational Services;
  • Professional, Scientific & Technical Services;
  • Utilities; Public Administration;
  • Information;
  • Management of Companies & Support Services;
  • Transportation & Warehousing;
  • Retail Trade; and Wholesale Trade.

The only industry to report a decrease was Arts, Entertainment & Recreation.

What NMI Panelists Told ISM

  • “Low milk prices and a weakened dairy economy resulted in reduced feed sales.” (Agriculture, Forestry, Fishing & Hunting)
  • “New residential sales are off the typical pace by 10 to 15 percent year over year. Tariffs are working their way through the system, raising costs on finished materials. Wet weather has slowed construction and starts for the beginning of the season.” (Construction)
  • “The continued restructuring of ocean-carrier routing is still causing havoc in the supply chain. We are experiencing minimal impact due to an increase in inventory levels.” (Wholesale Trade)
  • “The largest business condition impacting general purchasing operations is the increased cost of goods due to the tariffs placed on China.” (Retail Trade)
  • “Business continues to run well, [with] indications of slowing customer demand and improvement in supplier delivery performance.” (Transportation & Warehousing)
  • “General conditions are steady — not increasing or going down.” (Finance & Insurance)
  • “Waiting to see what new tariffs on Mexican steel will do to the market.” (Professional, Scientific & Technical Services)
  • “The suppliers we do business with are ‘claiming tariffs’ to justify price increases. While some of these issues could be credible, it’s our opinion that this issue provides cover to increase margins, as few will detail the line-item impact.” (Management of Companies & Support Services)
  • “Closely watching the Trump tariffs on China, which could significantly impact medical supplies.” (Health Care & Social Assistance)
  • “Business is stable, but very fast paced. The labor market is tighter than ever, and we cannot work enough hours.” (Public Administration)

ISM Non-Manufacturing Index (NMI) Posts Sustainable Strength

Opinion

Representative Alexandria Ocasio-Cortez, D-N.Y., left, and Senator Bernie Sanders, D-I-Vt., right, graphic concept.
Representative Alexandria Ocasio-Cortez, D-N.Y., left, and Senator Bernie Sanders, D-I-Vt., right, graphic concept.

By offering all sorts of freebies to various constituencies, Bernie Sanders has positioned himself as the true-believing socialist in the Democratic Party — even though he’s actually a member of the “top-1 percent”.

But he has plenty of competition. 

Kamala Harris and Elizabeth Warren are strong competitors in the free-lunch Olympics, and most of the rest of the candidates are saying “me, too” as well.

Assuming these candidates get a warm reception, this is a worrisome development.

Part of America’s superior societal capital is — or, has been — our immunity to the free-lunch message.

If that’s changing, it will be very hard to be optimistic about the future.

Antony Davies of Duquesne University and James Harrigan of the University of Arizona wrote for FEE about the dangerous – and seductive – ideology of something-for-nothing.

…politicians are tripping over each other to offer voters more “free” things, including everything from health care and college to a guaranteed basic income. But voters should be fostering a healthy sense of skepticism. If there is one eternal and immutable fact in economics, it is that nothing is free. Nothing. …as voters, our healthy skepticism seems to go right out the window. When politicians promise all sorts of “free” things, it doesn’t occur to many of us that those things can’t possibly be free. It doesn’t occur to us that, like businesses seeking our dollars, politicians will tell us whatever it takes to get hold of our votes. …Don’t be so gullible…when you hear Alexandria Ocasio-Cortez and Bernie Sanders tell you how health care and higher education will be free for everyone, remember that…health care and higher education cannot and will never be free.

Davies and Harrigan are economically right. Indeed, they are 100 percent right.

There’s no such thing as a free lunch.

But there are lunches that financed by others. And that’s why I’m worried about support for Sanders and other hard-left Democrats.

I don’t want America to turn into Europe, with people thinking they have a “right” to a wide array of goodies, paid for by someone else.

So what’s the alternative to the something-for-nothing ideology of the modern left?

Former Louisiana Governor Bobby Jindal recently opined on this topic in the Wall Street Journal.

Progressives are changing the Democratic Party’s focus…to subsidizing everything for everybody. …Democrats now promise free college, free health care and more—for everyone. Republicans can’t outspend Democrats, but they can make the case for freedom and against the idea that everything is “free”… The Republican ideal is…an aspirational society. …becoming dependent on government is the American nightmare. …Republicans have to do more than mock the Green New Deal…if they want to persuade young voters of the case for limited government and personal freedom. …“free” means more government control at the expense of consumer autonomy. When progressives promise government will pay for health care and college, they are really saying government will run medicine and higher education. …“Free” means less efficiency, more expense and lower quality. …“Free” means robbing from America’s children. …Despite proposed marginal rates as high as 70% or even 90%, none of the tax plans Democrats have put forward would raise nearly enough revenue to pay for the promised spending. …Republicans can’t outbid Santa Claus. Americans are willing to work hard and sacrifice for a better life but need to know how pro-growth policies benefit them. Voters may be tempted by progressives’ crazy plans… They will embrace effective market-based solutions that promote freedom if Republicans offer them.

Gov. Jindal has a great message about trumpeting growth as an alternative to redistribution.

Though I’m not brimming with confidence that Republicans are overly sincere when they use this type of rhetoric. Some of them, like Trump, don’t even bother with pretending that they want to curtail dependency and shrink the social welfare state.

And that does not bode well for America’s future.

Representative Alexandria Ocasio-Cortez, D-N.Y., left, and Senator

Video

On Liberty Never Sleeps, Tom discusses the 4th of July, and how badly divided America is on issues that broke from England in 1776.

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On Liberty Never Sleeps, Tom discusses the

Economy

Closeup view of a business man cutting a piece of paper with the word jobs written on it, concept for job cut reports. (Photo: AdobeStock)
Closeup view of a business man cutting a piece of paper with the word jobs written on it, concept for job cut reports. (Photo: AdobeStock)

U.S.-based employers plan to cut 140,577 jobs in the second quarter (Q2) 2019, down 26% from the 190,410 cuts in Q1, according to the Challenger Job-Cut Report. The month of June — down to 41,977 from 58,577 in May — could signal an uptick in labor demand.

IndicatorPrior (May)Result (June)
Announced Layoffs58,577 41,977

“The second quarter is historically the slowest period for job cut plans. Companies typically have not determined staffing decisions by this point, either because they are in the middle of or are only approaching their fiscal year’s end by June,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc.

Q2 2019 cuts are still 34% higher than the 104,800 job cuts announced in Q2 2018. The total is the highest Q2 since 2015, when 147,458 cuts were announced.

“Job cuts are trending higher overall. In addition to Retail, we’ve seen significant cuts in the Industrial Manufacturing and Automotive sectors in recent months,” said Challenger.

June-2019-Job-Cuts-ReportDownload

Closeup view of a business man cutting

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