Cramer: The Real Problem With the Economy

(Click for video linked to a searchable transcript of this Mad Money segment)

Does it feel to you like the economy just can't kick into higher gear? It feels that way to Cramer too.

And he thinks he knows what's wrong.

The Mad Money host put the pieces together while he was listening to a conference call hosted by Paychex, a payroll processing company.

"What they said was a real punch in the gut," Cramer explained.

"The chief financial officer, Efrain Rivera said that to generate the growth Wall Street would like to see in their payroll processing business 'there needs to be a slightly different environment in terms of new business formation.'

In other words, Paychex isn't getting the volume of small business clients that they should be getting if the economy is truly starting to turn a corner.

It may not seem obvious, but small business is critical to the economy and therefore the recovery.

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For example, according to the Small Business Council firms with fewer than 100 workers employ 34.9 percent of private sector payrolls, and small firms accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009.

Although big business may be generating its fair share of new jobs until small business is able to do the same, the economy may be stuck in second gear.

And Cramer fears that may remain the state of affairs for some time to come. Although starting a small business has never been easy, Cramer fears it may be more difficult today, than it had been at any other time in recent memory.

That is, the Mad Money host thinks that increased regulation, higher taxes, higher fuel costs, spending cuts and more have thwarted entrepreneurs who would otherwise go into business.

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"I think that, more than anything else is the reason behind the lack of small business creation," Cramer said. "Until that's dealt with get used to the new norm and what might be a permanently lower job-growth environment."

Call Cramer: 1-800-743-CNBC

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