I recently attended the second annual Kauffman Foundation Economics
Bloggers Forum at the foundation’s headquarters in Kansas City, Mo.
The invited attendees were economists who write popular blogs or
those, like me, who write about the economy in their blogs.
The economists there
were in general agreement that the economic forecast for the next year
or so remains pretty bleak. This is particularly true on Main Street
America, as they see little job growth in the foreseeable future.
About half believe the
economy will remain as it is now, with unemployment hovering around 9
percent or 10 percent and economic growth staying anemic. The other half
think the economy will turn significantly worse in the next year or
two, in large part because of the federal debt.
Recent surveys of small-business owners seem to
indicate that many entrepreneurs share the worries expressed by the
economists at the bloggers forum and are taking specific actions to deal
with what they see as a continuing recession.
According to the latest poll of small-business owners
taken by the National Federation of Independent Business, one defensive
measure entrepreneurs are taking is putting off hiring.
“Net job creation will
appear in the coming months, but the gains will be painfully slow with
timid consumer spending, especially in the service sector,” said William
Dunkelberg, the NFIB’s chief economist.
In the NFIB survey, owners complained that poor sales
are their biggest problem, and that there is no need to hire with no
new customers. In this harsh sales environment, it’s hard for workers to
earn their pay. Owners cannot pay workers more than the value they add
to the firm.
More than half stockpile
cash
A survey conducted by Brother
International Corp. found that small-business owners are strengthening
their cash reserves to buffer the impact of a prolonged recession.
The survey revealed
that 53 percent of small-business owners believe stockpiling cash is the
best strategy for surviving the current economic climate, as opposed to
investing in their businesses.
This is a prudent strategy during a weak economy and
can help protect a business from future economic shocks. Cash is the
best cushion against uncertainty.
The same survey showed that the majority of
small-business owners (79 percent) plan to strive to make their company
more efficient this year. Bootstrapping is back in style, and it’s a
great path to higher cash reserves.
Economists and entrepreneurs seem to agree that, in
terms of Main Street America, the economy will not improve anytime soon.
While the economists disagree on the public policy needed to improve
the situation, entrepreneurs are taking steps to weather the ongoing
financial storm.