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Economix Blog: Business Optimism Plunges

December 11, 2012 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

The Small Business Optimism Index is starting to look misnamed.

The index, reported monthly by the National Federation of Independent Business, had one of the steepest declines in its history in November, and is now at one of its lowest readings ever. The industry group has reported a lower index value only seven times since it began conducting monthly surveys in 1986. Businesses, it seems, are about as optimistic today as they are during the typical recession.

Hurricane Sandy did not seem to have driven the decline in optimism, either, given that the survey did not show much difference between sentiment at businesses in states hit by Sandy and those in states it spared.

The big drag on overall optimism came from small businesses’ view of the future.

In October, businesses were slightly more likely to say that they expected business conditions to improve in the next six months than they were to say that conditions would worsen. But by November, the outlook darkened substantially. The net percentage of business owners saying they expected better conditions — that is, the share saying they expect improvement minus the share saying they expect deterioration — was negative 35 percent.

Source: National Federation of Independent Business, via Haver Analytics. Source: National Federation of Independent Business, via Haver Analytics.

That is the worst outlook since the federation began collecting this data on a monthly basis. Bill Dunkelberg, the chief economist at the National Federation of Independent Business, attributed the pessimism about the future to looming fiscal austerity measures scheduled for 2013, higher health care costs and “the endless onslaught of new regulations.”

While businesses have been gloomy for a while, consumers had been resisting warnings about the impending so-called fiscal cliff of rising taxes and spending cuts. Until recently, that is.

The latest consumer sentiment survey from the University of Michigan showed consumer sentiment nose-diving. Gallup’s Economic Confidence Index likewise slid recently, mostly because of declining expectations about the future, although the overall index was still higher than it was for most of this year.

The Conference Board’s Consumer Confidence Index reported a small increase in November, at least.

Article source: http://economix.blogs.nytimes.com/2012/12/11/small-business-optimism-plunges/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

I.H.T. Special Report: Net Worth: Keeping a Wary Eye on the Euro Zone

November 23, 2011 by Leave a Comment

Q. How much worse can the European debt crisis get?

A.
The European crisis potentially still has a long way to run, with the crisis now affecting the core as well as the peripheral economies. While the euro zone leaders have said they will effectively do what it takes to defend the euro, actions speak louder than words. The politicians have been guilty of talking too much and doing too little over the last year.

Going forward, there is still a very real risk that things could get substantially worse in the euro zone, with serious ramifications for the global economy.

Q. Where is the global economy particularly vulnerable? What areas should investors watch?

A.
The euro zone is key, and Italy, in particular, is in the firing line. The Italian bond market is the third largest in the world, and there are doubts whether it would be possible to bail it out. The risks are significantly to the downside.

Outside of Europe, there has actually been better news on improving growth in the United States and falling inflation in China.

Q. Will the euro survive?

A.
We think that the euro will survive because there is no mechanism for any country to leave. In addition, the cost to both the countries that leave and those that stay would be huge, with the cost of exit far higher than the cost of staying.

Any further deterioration in Europe would probably lead to euro weakness against the U.S. dollar and other currencies. By many measures, the euro remains overvalued against the dollar and other currencies. We expect Asian currencies to perform well, although they could weaken if a major crisis developed.

Q. In the current environment, what should investors be buying, or selling?

A.
We still see great value in equities, particularly relative to cash and bonds, which both look particularly unattractive over the next couple of years. With this in mind, now is not the time to panic and sell out of equities. With any investment, the right time horizon is key, and equity investors need to exhibit greater patience than they have done in recent years.

What is important is to have a sensible, diversified portfolio across all asset classes that is designed to meet an investor’s needs in line with their risk profile.

Q. Where do you see the best investment opportunities?

A.
China is looking very attractive for the coming 12 months. With the prospect of slowing inflation, the central bank has the ability to ease monetary policy, a situation developed countries could only dream of. In addition, we see valuations are favorable, particularly after the recent sharp sell-off, and global investors are underweight China, which should create attractive upward pressure when investors return.

Q. What about commodities? Has their rally run its course?

A.
Commodities do offer compelling investment opportunities, and there is certainly no drought of likely influences that can impact prices over the next 12 months. We see challenges faced in production and geopolitical risks, not to mention the overriding macro headwinds threatening global economic growth coming from the developed world, and Europe in particular. Gold looks potentially in bubble territory and trading as a safe-haven asset, but, nevertheless, risks remain for price appreciation in the near term, given the uncertainty in the macroeconomic environment.

Q. Is Asia the answer, or will Asia stall and enter a period of prolonged slowdown?

A.
We remain very comfortable with the outlook for Asia and remain overweight. The ongoing nature of the euro crisis is causing risk aversion across the globe, and, as such, some investors are shunning Asia and focusing on developed markets such as the United States.

However, longer term it is clear that the global economy is going through a structural shift and rebalancing towards Asia and the emerging markets. This will give Asian equities a strong tailwind as investors begin to strategically increase their weights to the region.

Article source: http://feeds.nytimes.com/click.phdo?i=51741c373e157b88179a241bf431fe35

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Economix: Average Length of Unemployment at All-Time High

June 4, 2011 by Leave a Comment

The average unemployed person in America has been looking for work for 39.7 weeks, or more than nine months. That is the longest average unemployment spell since the Labor Department started keeping track in 1948:

DESCRIPTIONSource: Bureau of Labor Statistics Note: Pink line on the right side of the graph shows what the numbers would be if calculated under the Labor Department’s older methodology for average unemployment duration.

Now, the Labor Department changed the way it calculates this number in January. But even under the old methodology (shown in the teeny pink line at the far right of the chart), workers still had the longest average spells of unemployment on record this May.

The growing length of joblessness is particularly worrisome because it tends to be self-perpetuating. The longer a person is unemployed, the less employable he or she becomes because of factors like stigma and skill deterioration. That means that the longer it takes to get Americans back to work, the further behind they will fall.

The social safety net for these workers is also fraying. Many of the long-term unemployed — who now constitute about 45 percent of all unemployed workers — have already had their jobless benefits run out. In some cases states (like Arizona) have neglected to make the legislative changes necessary to receive additional jobless benefits paid for with federal money.

To add insult to injury, many unemployed people who have retrained for new careers have so far racked up student loan debts but not jobs.

These long-term unemployed are disproportionately composed of older workers — who, compared to younger workers, are less likely to lose their jobs, but more likely to have trouble finding re-employment if they are laid off. Given how far behind these workers have already fallen, it may turn out that many of these Americans will never work again.

Article source: http://feeds.nytimes.com/click.phdo?i=975cd69efcb9016f78a223e05b1d4f92

Filed Under: Economy News Tagged With: , ,