If I were to do an informal survey right now, I’m pretty sure a sizable number of our readers either work for small manufacturing businesses or depend on small businesses to continue their operations.
That’s why the argument that Scott Shane lays out in a recent Business Week article is pretty important to our readers indeed, to the majority of working Americans in the country today. Shane asserts that the Fed’s second installment of quantitative easing will do very little to help small businesses (which account for roughly half of the private-sector economy), instead potentially widening the gap between them and their large multinational counterparts.
The jobless rate remains high, up to 9.8 percent in November, and the Bureau of Labor Statistics reported that only 39,000 new jobs were added last month at least 150,000 a month are needed to keep the unemployment rate stable. The Financial Times outlines the good news: the PMI slipped only 0.3 points to 56.6 last month, according to ISM, keeping up the recent trend of overall positive growth, which is what many economists expected. “Manufacturing was fuelled by accelerating growth in imports, inventories and supplier deliveries, the article reads. “However, employment, production and new orders grew more slowly in November.
Small businesses are especially hurting in the latter three areas. The slightly improved manufacturing statistics may not be reflective of what SBs are facing, and indeed, SB owners are responsible for many of the new jobs added. Shane points out that the Small Business Administration says small companies generate more than 50 percent of “nonagricultural private-sector gross domestic product but only 31 percent of exports.
The major goals of QE2 to drive bond interest rates down and hope banks will lend more are lost on SBs, because they are suffering from lower demand for their products/services and have no incentive to borrow money to expand their operations (not that the banks are champing at the bit to lend anyway.)
What we’re left with is to push for more constructive developments on the fiscal policy side of things, not the Fed’s monetary policy, as Shane concludes. The Obama administration’s recent compromise on extending the Bush tax cuts is step in this direction; entertaining the idea of a QE3 is not. Lisa Reisman and Jason Busch, editors of MetalMiner and Spend Matters, respectively, outlined exactly what Congress needs to do in 2011 to help the manufacturing sector many of their ideas apply to the future health and well-being of small businesses, those very companies serving as the heartbeat of a nation that makes and builds things.