It is hard to document explicitly, but there seems to be general agreement that “uncertainty” keeps business owners and consumers from spending more and investors from buying stocks.
There is less agreement, usually on partisan grounds, on how much “uncertainty” is emanating from Congress and the Administration.
For business owners, the plethora of bills currently working their way through Congress produce considerable uncertainty including Cap and Trade, Card Check, Health Care Reform, Wealth Taxes, the Bush Tax Cut expiration, a VAT tax, various stimulus packages passed and proposed, a possible Jobs Tax Credit (don’t hire until it is passed!!) etc, etc.
Proposing massive change generates a lot of uncertainty until legislation is passed, and there is plenty of that going on in Washington these days (many economists feel that Washington is the major source of business uncertainty). Many observers feel that the Massachusetts Senatorial Election change the chances that these pieces of legislation will pass, which should reduce, at least a little, the level of uncertainty and fear that owners might feel.
Measures of business owner optimism have been at 35 year lows for some time.
It might, therefore, be instructive to examine the responses of small business owners to questions about the “future” answered “Before” and “After” the election.
Although the election was held on January 18, results were not confirmed until the end of the day. So, any of NFIB’s questionnaires received by NFIB in the few days after the 18th were likely filled out before the election results were known. To insure that these were not included in the “After” sample, only interviews received on or after January 25 were included in the pool of "After" respondents.
Looking at the expectation questions enumerated below, it is clear that the respondents to the NFIB survey after the election are more optimistic about the future than respondents prior to the election.
We leave it to the reader to decide what this might mean for the willingness of owners to hire and spend.
Before After Change:
- Is The Current Period a Good Time to Expand Substantially 3.5% 4.8% +1.3
- Expect Better Business Conditions in 6 Months (Net) 6.9% 9.9% +3.0
- Expect Increased Real Sales Volume (Net) -4.4% -0.5% +3.9
- Increase the Total Number of Workers (Net) -1.1% 2.4% +3.5
- Plan to Make Capital Expenditures 19.1% 21.3% +2.2
(“Net”: the percent of owners giving a negative response was subtracted from the percent giving a positive response where appropriate).
Based on 2114 respondents to NFIB’s January survey, 1,568 responses received and processed before January 25, 545 received and processed after that date.
William Dunkelberg is an Economic Strategist, Boenning & Scattergood and Chief Economist, National Federation of Independent Business.