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Small Business Optimism Hit Record High In January

The National Federation of Independent Business (NFIB) represents over 325,000 small businesses in all 50 states and is a strong advocate for small company owners around the country. Each month, the NFIB surveys its members to gauge their optimism or pessimism.

The NFIB’s “Small Business Optimism Index” soared to a record high in 2017, reaching 104.8 in December, the highest level since the survey began 44 years ago. In January, the Index rose 2.1 points to yet another record high at 106.9. The January survey also found that a record number of small business owners said that: “Now is a Good Time to Expand.”

Other indicators from the January NFIB survey showed improvement. “Actual Earnings” climbed 11 points from December to the highest level since 1988. Plans to make “Capital Outlays” and plans to “Increase Inventories” both rose in January. Worker compensation rose four percentage points to the highest reading since 2000. Unfortunately, most small business owners reported difficulty finding qualified workers for open positions.

“The historically high index readings over the last year tell us small business owners have never been more positive about the economy,” said NFIB Chief Economist Bill Dunkelberg. “This is in large response to the new management in Washington tackling the biggest concerns of small business owners – high taxes and regulations.”

NFIB President & CEO Juanita Duggan noted: “Main Street is roaring. Small business owners are not only reporting better profits, but they’re also ready to grow and expand. The record level of enthusiasm for expansion follows a year of record-breaking optimism among small businesses.”

Why Our Shrinking Middle Class is a Good Thing

America’s “middle class” has been shrinking over time, from 61% of US households in 1971 to only 50% in 2015. The US Census Bureau defines the middle class as those households earning between two-thirds and twice the median household income. The median household income was $57,230 in 2015, so the middle class would include those making between roughly $39,000 and $114,000 per this definition.

Using a longer period, say 1967 to 2016, and a slightly different income measure, the middle class would be made up of those households making between $35,000 and $100,000. This is how the middle class is most commonly defined.

The question is, if the middle class is shrinking, where are they going: up or down in terms of income? The fact is, the middle class is shrinking because so many US households are moving up to higher income groups, not down.

And there’s more good news. The percentage of US households making $100,000 or more is increasing while those making less than $35,000 is shrinking. In 1969, only 8.1% of households made $100,000 but by 2016, that number more than quadrupled to 27.7% (more than one out of four). Meanwhile, the share of households making $35,000 or less decreased from 38.7% to 30.2%.

The question is, why do we not hear more about this good news in the mainstream media? Because this news does not fit the media narrative that the middle class is shrinking due to income inequality and stagnant wages. This is obviously not true.

The fact that nearly 28% percent of US households earn $100,000 or more annually runs counter to the widespread narrative of an American middle-class in decline and deserves much greater attention. It shows a dynamic and prosperous America with significant income mobility.

4Q Gross Domestic Product Revised Down to 2.5%

The Commerce Department reported on Wednesday that 4Q GDP rose by an annual rate of 2.5%, down from 2.6% reported in late January, but in-line with the pre-report consensus. The downward revision was largely due to a reduction in inventory investment. If yesterday’s second estimate of 4Q GDP holds, the US economy grew by 2.3% last year, up from only 1.5% in 2016.

The US economy had picked up steam in the second and third quarters of last year, posting above 3% growth rates, but that momentum faded somewhat in the 4Q. Most forecasters expect growth will slow even more in the 1Q of 2018. Forecasting firm Macroeconomic Advisers on Tuesday projected a growth rate of 1.8% in the 1Q of this year.

The good news in yesterday’s report was that growth in consumer spending, which accounts for more than two-thirds of US economic activity, was unrevised at a 3.8% rate in the 4Q. That was the quickest pace since the 4Q of 2014 and followed a 2.2% rate of growth in the July-September period.

Consumers remain in good shape, and consumer confidence is at the highest level since 2000. As a result, and with the tax cuts kicking in, I’m not convinced the economy will slow more in the 1Q, and I continue to believe we could see 3% overall growth this year.

American Life Expectancy Declines 2nd Year in a Row

The Centers for Disease Control (CDC) announced yesterday that US life expectancy fell for the second consecutive year in 2016. This is the first time we’ve seen a multi-year drop in life expectancy in over a half century (1962). According to the report, the average life expectancy fell to 76.1 years for American men and 81.1… Continue Reading

GOP’s Hidden 45.6% Tax Bracket For Wealthy is For Real

I don’t want to be a broken record on the subject of the new GOP tax reform proposal, especially after devoting my entire E-Letter to it on Tuesday. Yet there is one troubling aspect of the new tax plan that has come to light this week as analysts dug deeper into the details. That revelation,… Continue Reading

Millennial Women Surging Ahead of Male Counterparts

Millennial Women Surging Ahead of Male Counterparts In my E-Letter on Tuesday, my main topic focused on how over one-third of Millennials are living with their parents today, out of necessity. Today I want to follow up on that discussion and point out another major trend we all should be aware of regarding Millennials. But… Continue Reading

Why Consumer Spending Remains Below Normal

  We are now into the eighth year of this economic expansion. The unemployment rate is at a 16-year low (4.3%), stocks are at all-time record highs, home prices have fully recovered in most areas and wages are finally starting to rise. The question is, why aren’t consumers spending more? Consumer spending accounts for apprx.… Continue Reading