Time to get off the fence and invest?
Have you been on the fence about investing in your small or medium business — or taking out loans to invest in a new business? Is it finally time to jump to the other side where green pastures await?
Today’s news on higher-than expected US job growth, wage growth and continued lower unemployment may suggest that the US economy has achieved a sustainable growth path, and that US consumers will be more able and willing to spend into the near or even foreseeable future. If true, it may portend growth and strength for small and medium businesses who depend on consumer confidence, stability, sense of wealth and available spending money. Whether you already run or hope to start a consumer product-based or service business, this matters to you.
Interest rates for now remain very low, so perhaps it’s a reasonable time to take on some loan risk to invest in your businesses. Yet most economists predict rates will only stay this low for a very short time, perhaps until mid-2015, when the Federal Reserve is expected raise rates after keeping them near zero since the financial crisis reached its nadir in 2008. Some economists think the Fed may raise its key interest rate even earlier, perhaps in March.
Is it meaningful?
Does this suggest the time to act on new investment is right now?
Is this uptick an aberration, or will it last? Most economists today seem to be saying today’s numbers, plus other recent indicators, together reflect a real recovery in the underlying fundamentals. Scott Anderson, chief economist at Bank of the West, told the Washington Post “the labor market is healing faster than almost any analysts expected just a few months ago,” and Ian Shepherdson, chief economist at Pantheon Macroeconomics told the New York Times “we’ve had strong hiring indicators in a number of surveys, and lower jobless claims, so sooner or later, we were going to get a blockbuster number… the timing of this uptick is consistent with other evidence of economic growth.”
President Obama pointed out today that while “we still have a lot more work to do to make sure that hard-working Americans’ wages are growing faster… the United States continues to out-pace most of the world. Over the last four years we’ve put more people back to work than Europe, Japan, and all other industrialized, advanced countries combined.”
What are the numbers?
Total nonfarm payroll employment increased by 321,000 in November, and the unemployment rate was unchanged at 5.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains were widespread, led by growth in professional and business services, retail trade, health care, and manufacturing.
The bureau also revised upward by 44,000 the reported number of jobs added in September and October. September through November represent the best three-month period of labor-market expansion since the Great Recession began. Combined with the rest of 2014, the US is on track to achieve the best job growth since the late 1990s.
The US Department of Labor said the 5.8 percent unemployment rate was steady from the previous month, at its lowest level since July 2008.
Wages are rising too
Average hourly earnings also grew by 0.4 percent in November, their biggest increase since June 2013. Providing an additional boost to consumers’ wallets, the number of hours worked also increased, by one-tenth.
Are we there yet? Are your customers spending more? Are you feeling confident enough to invest more?
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Who is John Paulsen? A former small-business leader myself, I feel your pain (and joy) and hope you’ll enjoy the blog. I launched and ran a well-regarded production company in San Francisco with a team of 9 brilliant, hard working people. I learned to manage a wide array of tasks a small business must handle — business strategy, facilities design, HR, payroll, taxes, marketing, all the way down to choosing telecom equipment and spec’ing a server system to help my team collaborate in real-time on dense media projects from multiple production rooms. I’ve partnered with and learned from dozens of small business owners.
