Small Business Week in Review: 03/09/09

Economic News Roundup

ADP Unemployment figures for February came in worse than expected at -697,000 versus the consensus figure of 630,000.  The numbers for Janaury were also revised downward from -522,000 to -614,000.  Job loss continues to accelerate.   Stories of job applicants were both disheartening and diconcerting.  A public school in Ohio received 700 applications for 1 janitorial position.

Evidence of the slumping economy is stacking up at an Ohio school which has nearly 700 applications for one open janitorial job…

…Superintendent John Richard says many applicants are laid-off workers with heart-wrenching stories about the tough economic times.

Forty-nine-year-old Donna Croston says she applied after losing jobs at two nearby factories that closed.

Small Business Week in Review: 03/02/09

Economic News Roundup

Nationalization of Citigroup and Bank of America took center stage this week.  Shares of Citigroup (NYSE:C) fell below $2.00 a share on Friday and were trading below $1.50 in the pre-market this morning.  Economists Nouriel Rubini and Paul Krugman advocated temporary nationalization of the banks.  Former Federal Reserve Chairman Al Greenspan also suggested that a temporary nationalization of the banking sector might be appropriate.

Speaking to the FT ahead of a speech to the Economic Club of New York on Tuesday, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.

Current Federal Reserve Chair, Ben Bernanke however rejected nationalization as an option, favoring taking substantial ownership in the companies through common stock purchases and other debt instruments instead.  Executing upon this strategy, the United States Government took a 38% stake in Citigroup by converting its preferred shares into commons shares.  The deterioriate in Citigroups shares since the converstion to common stock led to a mult-billion dollar loss on the investment overnight.

Microsoft CEO Steve Ballmer Talks About The Economy

Steve Ballmer gave a speech during the U.S. House of Representatives Democratic Caucus Retreat yesterday.  Ballmer commented:

• That the economic expansion over the last 25 years  was built on innovation, globalization, and debt
• That in recent times, the balance of growth shifted away from innovation to debt - i.e. the consumer economy
• That debt levels, which were are at 300% of GDP need to revert back to mean.  The economy will have reset before sustainable growth can be had again
• No industry sector will be immune to the downturn

Small Business Week In Review: 02/02/09

Economic News Roundup

The global economy continues its rapid deterioration.  The Economist Magazine reports:

Yet many of Asia’s tiger economies seem to have been hit harder than their spendthrift Western counterparts. In the fourth quarter of 2008, GDP probably fell by an average annualised rate of around 15% in Hong Kong, Singapore, South Korea and Taiwan; their exports slumped more than 50% at an annualised rate.
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In the fourth quarter of 2008, real GDP fell by an annualised rate of 21% in South Korea and 17% in Singapore, leaving output in both countries 3-4% lower than a year earlier. Singapore’s government has admitted the economy may contract by as much as 5% this year, its deepest recession since independence in 1965.

Small Business Week In Review: 01/26/09

Former Secretary of the Treasury, Lawernce Summers, said the months ahead will be extremely challenging.  Credit is still frozen and most banks are technically insolvent.  According to a Bloomberg News survey, Gross Domestic Product (GDP) contracted at an annual rate of 5.5% between October 2008 and December 2008.   Some small business owners have started taking drastic action to cope with the conditions.

To cope, small business owners — from neighborhood plumbers to graphic design firms — are paying employee salaries before their own, trying to renegotiate leases and pleading for customers on neighborhood blogs. But despite their best efforts, the customers aren’t there.
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While falling sales and the credit crunch have made headlines, the small business owners left standing are facing problems as varied as the businesses they run. Manufacturing is slowing. Layoffs are looming. Financing is hard, if not impossible, to come by. Vendors are being skittish about extending credit for inventory. Rents are rising. And profits are falling — or vanishing altogether as sales slip.

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