...Get enough businesses thinking that way at the same time and you have the makings of an economic boom… which is what the leading survey of small business owners says is happening.
The National Federation of Independent Business has been surveying its small business members since 1973, overseen by my very good friend Dr. Bill Dunkelberg (Dunk to his friends). The NFIB data is a rich, long-term history of small business owner sentiment, both positive and negative. It has varied over time, as you might expect. Presently, their index is near its most optimistic level ever—0.1% below the 1983 all-time high. Considering where we were a few years ago, that is amazing.
As you can see, NFIB member optimism had two prior peaks near the current level. One was in 2004, when the housing boom was starting to take off. It would end badly a few years later, but those were good times while they lasted.
The other peak was in 1983. The Volcker Fed had mostly stamped out inflation while Reagan’s tax cuts and deregulation were beginning to bear fruit. This marked a boom period that would last even longer; the next recession would not strike until mid-1990.
As I like to say, history doesn’t repeat itself, but it often rhymes. This time, the Fed has been working to stamp out deflation, not inflation, and appears to have made some progress. We also have a new, business-oriented administration, similar in some respects to the shift from Carter to Reagan. This encouraged early 1980s business owners, and the Trump administration is doing the same now.
... I don’t think most business owners were thrilled with Trump. They were more thrilled not to have Clinton.
...In the past, we’ve seen this index decline gradually over 2–3 years as the economy edged toward recession. We see no such thing now. We see the opposite as the index moves up. That suggests, as I heard at Camp Kotok, the present expansion will continue into 2019 and beyond.
...The gain in civilian employment in July helped push the unemployment rate down to 3.9%, despite an increase in the labor force, which is up 1.5 million in the past year. Moreover, the U-6 unemployment rate, which includes discouraged and marginally-attached workers, as well as those working part-time who say they want full-time jobs, fell to 7.5%, the lowest level since 2001. ...total cash earnings—which exclude extra earnings from irregular bonuses and commissions, like those paid out after the tax cut was passed—are up 5.0% in the past year, more than enough to keep pushing consumer spending higher.
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