NFIB

Back to Normal?
03/ 28/ 2002

by Bill Dunkelberg

Well, "normalcy" has returned and we can get back to our recession, which was already in progress. How can you be sure that "normalcy" is back? Government spending is surging and the word "deficit" is now the operative budgetary descriptor in Washington.

As for the "stimulus package": Congress went home in December without passing one. And that's probably good. Since the average post-war recession has lasted only 11 months, and according to the National Bureau of Economic Research we slipped into recession in March of 2001, this one must be about over.

While Congress "fiddles," the private sector has gone about the business of repairing the economy. According to NFIB owners, this recession probably ended in the fourth quarter of 2001. Forty-two percent of owners think the economy will be better in six months. This is one of the strongest readings in survey history and has always been followed by a positive reversal in GDP growth. The percent of owners expecting real sales volume to increase in the next six months also increased substantially, gaining 10 percentage points to a net 16 percent of all owners. That's low historically (the high is 36 percent), but clearly headed up.

Missing in action were increases in hiring plans (only 7 percent plan to expand their workforce), inventory accumulation plans (only 2 percent plan to add to stock), and capital spending (31 percent plan outlays, rising steadily since last September). These are the factors that make GDP grow.

At this point, it appears the economy will start growing again, but growth will be modest. Profits will improve some, driven by extensive cost cutting and restructuring last year as well as lower energy costs and taxes. 2002 will look pretty good historically--as long as you don't compare it to 2000.

NFIB's Small Business Economic Trends, begun in 1973, is the longest continuous survey of small business optimism and conditions. It is frequently quoted by Federal Reserve Chairman Alan Greenspan and national media. Monthly surveys are sent to more than 2,500 NFIB members and quarterly surveys are sent to more than 7,500 members. The few minutes members spend completing the surveys adds to NFIB's stature as the source of the nation's foremost research about small business.

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