NFIB Weekly News
Leading the News
Optimism Index “Returning To Normal Levels As Owners Express Uncertainty About The Future.”
The NFIB Small Business Optimism Index for January was 101.2, slipping 3.2 points since December. Business owners continued hiring and investing, but expressed increasing concern about future economic growth. The reading was the lowest since the weeks leading up to the 2016 elections. Though it remains well above the historical average of 98, it indicates uncertainty among small business owners due to the 35-day government shutdown and financial market instability. NFIB President and CEO Juanita Duggan was quoted saying, “Business operations are still very strong, but small business owners’ expectations about the future are shaky...One thing small businesses make clear to us is their dislike for uncertainty, and while they are continuing to create jobs and increase compensation at a frenetic pace, the political climate is affecting how they view the future.”
January Jobs Gains Demonstrate US Economy’s Strength, Momentum. Business Climate
“Add the recent government shutdown to the list of things that didn’t slow the American job market,” the New York Times (2/1, A1, Casselman) reported on its front page, as according to the Labor Department, the US economy “added 304,000 jobs in January,” although “unemployment ticked up to 4 percent” due to what the Times said was “possibly a shutdown-related anomaly.” The Times says the month’s gains were “far more than forecasters had anticipated.”
President Agrees To Reopen Government For Three Weeks.
The New York Times (1/25, A1, Fandos, Stolberg, Baker) reported on its front page that the President announced he would “reopen the federal government for three weeks while negotiations continued over how to secure the nation’s southwestern border, backing down after a monthlong standoff failed to force Democrats to give him billions of dollars for his long-promised wall.” The Times added, “the surprise announcement was a remarkable surrender for a president who made the wall his nonnegotiable condition for reopening the government and a centerpiece of his political platform.”
Administration Decides Rules Regarding Eligibility For New Tax Deduction For Businesses.
The New York Times (1/18, Tankersley) reported the Trump Administration “finalized rules on Friday governing who can claim a new 20 percent tax deduction for business owners.” According to officials, the rules would permit millions of businesses to apply their taxes for 2018 with no ambiguity regarding their eligibility for the deduction. The Times reports that “the nation’s largest small-business advocacy group, the National Federation of Independent Business, welcomed the regulation.” Brad Close, Senior Vice President of Public Policy and Advocacy for NFIB, said the law provides “needed certainty for small business owners... The vast majority of small businesses will enjoy the benefits of the full 20 percent deduction.” Most “American small businesses are organized as pass-throughs, whose profits are divided up among owners and taxed as individual income.”
Democrats Looking To Roll Back Parts Of GOP Tax Reform Law.
The Hill (1/9, Jagoda) reported Democrats “in the coming year will be laying the groundwork to eventually roll back parts of President Trump’s tax law.” However, the piece explains that “with Republicans controlling the Senate and the White House, Democrats are unlikely to be able to undo any significant portion of the law in the next two years.” Their goal instead is “to lay a foundation for what they can do in the future if they retake the Senate or White House, hammering away at Republicans over the law’s least popular aspects ahead of the 2020 vote.”
Small Business Optimism Remains At Historic Highs.
The NFIB’s Small Business Optimism Index remained at historic highs, but has drifted down by 0.4 points to 104.4. Unfilled jobs and a lack of qualified applicants remain a concern as job openings set a new record and job creation plans increased in strength. NFIB President and CEO Juanita Duggan was quoted saying, “Optimism among small business owners continues to push record highs, but they need workers to generate more sales, provide services, and complete projects...Two of every three of these new jobs are historically created by the small business half of the economy, so it will be Main Street that will continue to drive economic growth.”
Media Analyses: Trump Benefits From Strong Economy, But Potential Perils Loom.
The AP (2/5, Rugaber) reported before President Trump’s State of the Union address that he was set to “enjoy the backdrop of a mostly solid economy” as he delivered the speech, though strong jobs numbers “haven’t fully erased concerns about an array of headwinds facing the U.S. economy this year.” Among the “challenges” cited by the AP are the US-China “trade war,” rising mortgage rates, the impact of the recent government shutdown, and slowing growth abroad.
Federal Reserve: US Consumer Borrowing Reaches $4 Trillion For First Time. Small Business Marketing
The AP (2/7, Crutsinger) reported the Federal Reserve said last Thursday that US consumer borrowing reached $4 trillion for the first time after December’s $16.6 billion increase. The December borrowing includes $1.7 billion in credit card debt and $14.8 billion in automobile and student loans. Federal Reserve analysts “expect further gains in consumer borrowing, supported by low unemployment and steady income gains.”
Treasury Clarifies Tax Reform For S Corps.
American Banker (2/5, Burns, Subscription Publication) reported the Treasury Department has “released its final rule tied to the Tax Cuts and Jobs Act that lets shareholders in S Corps, including banks, take a 20% deduction on qualified business income.” The Treasury “determined that qualified business income should include income from the origination and sale of loans, including mortgages.” The final rule “states that qualified business income exists when a business has gross receipts of $25 million or less, and less than a tenth of its total revenue comes from specified service trades or businesses,” according to Independent Community Bankers of America VP of Legislative Policy Alan Keller. The final rule did not, however, “clarify whether income from wealth management and trust services qualifies for the deduction.”
Democrats Seek To Limit Corporate Windfall From Trump Tax Cut.
The New York Times (2/7, Tankersley) reported that “top Democrats, eager to reverse a corporate windfall created by President Trump’s $1.5 trillion tax cut, are galvanizing around economic policies aimed at limiting the ability of companies to enrich shareholders.” The efforts, says the Times, were “part of a growing push to stoke Main Street anger toward Wall Street ahead of the 2020 presidential election.” Democrats are “looking for ways to prod businesses to share more of the winnings” from the Trump tax cuts with their workers. This week, Sen. Chuck Schumer (D-NY), who “has long allied with the financial firms that drive much of Manhattan’s economy, proposed limiting the ability of corporations to buy back shares of their stock and suggested possible changes in the tax treatment of investments.”
Fed’s Policy Decision Signals Concerns About Economy.
In an analysis, the Wall Street Journal (2/2, Timiraos, Subscription Publication) said that the decision by the Federal Reserve last week not to raise interest rates is a sign that it is concerned with the strength of the economy and its current expansion, and not a response to outside pressure. Recent economic indicators, such as the slowing global economy and increased trade tensions, appear to show potential threats to the US’ historic expansion, and the Fed is looking to move to a more observant position to better understand the impact of the change in interest rates.
World Economy Struggles To Escape Low-Growth And Low-Inflation.
The New York Times (1/27, Irwin) reported that new global data points to how “the era of persistently low growth, low inflation and low interest rates isn’t over after all” and that government banking agencies, such as the US Federal Reserve, European Central Bank, and the Bank of Japan, are now moving to adjust policies to reflect that reality. The Times stated that it expects the Federal Reserve to leave interest rates unchanged, but warns that the Federal Reserve will likely “discuss their broader strategy for making monetary policy, which may include keeping more of their giant portfolio of bonds...than analysts had once expected” because of how global economic weaknesses persist, despite signs of new economic strength in 2018.
Small Business Cards Open To Wide Array Of Entrepreneurs.
Nerd Wallet (2/8) took a look at who is eligible for small business credit cards, which are available to a range of people. According to the article, “You don’t need to operate an LLC or a corporation to count as a “business” for credit card application purposes. Sole proprietors can also apply for a small-business credit card. That means anyone from the owner of a company to a freelancer working from home can be considered business operators.”
Oracle Sets Sights On Smaller Companies, Non-Tech Users. Wages and Benefits
Joe McKendrick at ZDNet (1/30) reported Oracle of late “has been seeking to emphasize its ease of use to a more non-technical crowd, and not necessarily with the large organizations which form its core base.” He interviewed Oracle Cloud Business Group SVP Steve Daheb “to discuss Oracle’s intentions in the effervescent small business, startup and low-code space.” According to McKendrick, “Oracle’s IaaS offerings are directly competitive with those of Amazon Web Services, though it’s unclear how many non-Oracle customers are running non-Oracle apps on the IaaS portion of Oracle Cloud as an alternative to AWS.” Still, “Oracle Cloud is already attracting new types of customers – even startups, Daheb says.” Additionally, the company is “building in artificial intelligence and machine learning into its database and ERP products, with the intention of making them simple enough for a non-tech business type to use.” It isn’t only “DBAs and IT professionals who may see their capabilities elevated through cloud-based AI, he says,” and the company’s “plan is to open up to non-technical business users as well.”
SBA Prepared For Large Amount Of Loan Requests After Government Shutdown.
The Wall Street Journal (1/28, Minaya, Broughton, Sun, Subscription Publication) reported that the end of the government shutdown is welcome news for lenders that offer Small Business Administration-backed loans, according to Jennifer Demba, an analyst with SunTrust Robinson Humphrey. The Journal said the SBA stopped approving routine small-business loans during the shutdown, causing some owners to put expansion and improvement plans on hold. The SBA is “fully prepared to handle higher volume of loan requests to satisfy any unmet demand” once the government reopens, an agency official said last week.
Visa, Yelp To Partner On Small Business Advertising Push.
PYMNTS (1/24) reported Visa and Yelp “are pairing on an advertising initiative for U.S.-based small and mid-sized businesses (SMBs), eyeing increased presence on the latter’s local search service.” As part of the agreement, SMBs that use a Visa Business card to purchase $150 in Yelp ads “will receive an additional $50 for Yelp ads each month. That benefit can accrue up to an annual limit of $600 to help grow their businesses.” According to Visa Global Head of SME Business David Simon, “small businesses are at the center of our local communities and global economies, and we are delighted to work with Yelp to offer this benefit to U.S. Visa Business cardholders that will help increase their reach online,” adding that “we are committed to helping businesses thrive and expand their purchasing power through Visa’s fast, convenient and secure digital payment options.”
Stripe, Funding Circle To Offer Fixed Rate Loans To Small Business Owners.
Digital Transactions (1/22) reported payment processing company Stripe will partner with peer-to-peer finance provider Funding Circle “to extend loans to merchants using Stripe to process payments.” The move came in response to similar efforts by Square “which offers a funding program called Square Capital.” According to Stripe Head of Ecosystem Vicki Lin, “We’re excited to welcome Funding Circle into our vibrant ecosystem of partners that amplifies the value of Stripe to our users. With this partnership, Funding Circle will reach the millions of businesses on Stripe to provide more effective options for financing, and will help us in our mission to increase the [gross national product] of the internet.”
Inc Magazine Offers Tips For Healthcare Marketing In 2019.
Inc. Magazine (1/16) offered several tips for healthcare marketing – practice marketing in particular – for the coming year. “With a majority of people going online to look for a healthcare provider... healthcare providers should be thinking like small business owners in their digital marketing strategies if they want to thrive in the coming year.” Inc Magazine added that “if you’re not a doctor or own a practice, keep reading and think in reverse because you can also help provide these services for practices.”
House Holds Hearing On New Minimum Wage Bill.
Vox (2/8) reported that the House Committee on Education and Labor had Congress’ first hearing on the Raise the Wage Act this past Thursday. The act, if passed, “would eventually double the federal minimum wage by 2024.” The bill currently has over 190 sponsors, and would tie the minimum wage to median worker pay “so if middle-class wages go up — or down — so does the minimum wage.” It also would do away with lower minimum wages for tipped workers.
Samuelson Opposes Increased Social Security Spending.
In his column for the Washington Post (2/10), Robert Samuelson argued against Democratic proposals to increase spending on Social Security. Samuelson took issue with the claim that the nation “faces a retirement crisis,” citing Gallup data showing that “more than three-quarters of retirees (78 percent) say they ‘have enough money to live comfortably,’” and the Federal Reserve’s Survey of Consumer Finances, which found that “75 percent of Americans 65 and over have ‘at least enough to maintain [their] standard of living.’” Samuelson argued that “the notion that there is pervasive poverty among older Americans is a political fantasy that is used to justify spending that, as a society, we cannot afford.”
AP Analysis: CEA Report Signals That The White House Doesn’t Want Obamacare To Be Issue In 2020.
The AP (2/8, Alonso-Zaldivar) said a new report from the White House’s Council of Economic Advisers “tries to shift the Trump administration’s combative rhetoric on health care, suggesting changes to the Affordable Care Act under President Donald Trump do not fundamentally undermine the health law.” According to the AP, the report “says Obama-era subsidies that help low- and middle-income customers pay their premiums will help keep HealthCare.gov afloat even if some healthy people drop out or seek other coverage because of Trump’s changes.” Larry Levitt, of the Kaiser Family Foundation told the AP that the release of the report “suggests to him the administration is trying to move on from the battle over the ACA, which Trump and Republicans in Congress failed to repeal.”
Private Health Insurance Emerges As Early Policy Test For 2020 Democrats.
In a front-page article, the New York Times (2/2, A1, Martin, Goodnough) reported on the healthcare dilemma faced by Democratic candidates eyeing the presidency. Four Democratic presidential candidates have co-sponsored a bill by Sen. Bernie Sanders (I-VT) that would provide “Medicare for All” – a single government health plan, which is supported by 81 percent of Democrats. But most shy away from the more controversial question of whether that would end private insurance entirely, as activists on the left want.
Some Insurance Companies Indicate ACA Premiums Might Rise Next Year.
Inside Sources (2/3, Patrick) reported that some insurance companies are indicating “the price may go up next year” for Affordable Care Act health care insurance purchased on individual exchanges. The projected higher prices are due to a phaseout of reimbursement for the companies by states, the report says. The report added that Government Accountability Office “found in a report released this week” that “health insurance claims were higher than insurers expected from 2014-2016, prompting insurers to offload the costs onto customers via higher premiums.”
Restaurants Raise Prices, Replace Workers As Labor Costs Increase.
When asked by Business Insider (1/18) about the challenges facing the restaurant industry, the CEOs of Chipotle, Denny’s, and Macaroni Grill “all mentioned labor costs or related issues as a top concern.” Twenty-one states and Washington, DC raised their minimum wages as of January 1, and last week, “House Democrats introduced a bill that would raise the federal minimum wage to $15 per hour, more than double its current rate.” Chain restaurants are faced with two choices: “to generate or save money elsewhere” or “to cut workers.” Wingstop, for instance, “is testing replacing workers with ordering kiosks and lockers where customers can pick up orders.” Shake Shack, Taco Bell, and McDonald’s have introduced ordering kiosks, and Arby’s “has installed ovens that automatically roast beef.”