Jeremy Hobson: The index of Small Business Optimism is out, and I guess the headline is small businesses are slightly less optimistic. The National Federation of Independent Businesses says its index fell by a tenth of a percent last month.
That’s where we’ll start with Juli Niemann, analyst with Smith Moore & Company. She’s with us live as always from St. Louis. Good morning, Juli.
Juli Niemann: Good morning, Jeremy.
Hobson: Well it’s not a huge surprise that small businesses are a little less optimistic right now, given all that’s happening in the economy, but what’s your take on that?
Niemann: Small business owners are really headline driven and talk show influenced. There is a survivors bias now, many of the small businesses folded but those who did not have to close their doors are now seeing a pick up in business. It’s not robust, but it’s real nonetheless. They don’t really hire until they desperately need help — when they see a real recovery in their business — but they are starting to hire. They are talking about taxes and regulations and everything, but they hire when business is actually picking up, and that’s what we’re seeing now.
Hobson: So you are saying they are looking at the news headlines and they are seeing some bad headlines out there from Europe and elsewhere. But when you look at their bottom lines, they’re not quite as bad as it may seem.
Niemann: Bottom line, money talks.
Hobson: Well, let me get your thoughts on one other big story, Juli — the Fed says that the median net worth of the American household has fallen 40 percent during the Great Recession – it’s just a stunning number.
Niemann: It means about 70 percent of us in the middle class have seen their net worth destroyed after 18 years of gains. You’re looking at about a 40 percent dive due to housing values first of all, falling year after year for the last five years, and unfortunately it’s likely to remain very sluggish for years to come. Prices can’t go back to 2006 levels because those prices were highly speculative and basically in a bubble. Consumers really believe the monstrous banking myth of the home equity loan — unleash that pent up value in your ever increasing home and borrow on ficticious property values. They spent like crazy on toys, games, and prizes. Then they also saw their retirement income collapse as well. Incomes — they dropped a third years in a row, adjusted for inflation we’re back to 1996 levels, and the 2000 boom is totally busted.
Hobson: Juli Nieman, analyst at Smith Moore & Company, thanks as always.
Niemann: You bet.