dib20611 News - Third Quarter Economic Indicators

This article originally appeared in the November 2006 edition of diversityinbusiness.com

The ECONOMY

SBA Office of Advocacy Releases Third Quarter Indicators

by Dan Perkins

Source: SBA

The Small Business Administration's (SBA) Office of Advocacy, which claims to be "the voice of small business in government," has released its November newsletter containing the following trends:

Trends

3rd Quarter Activity

GROWTH

The U.S. economy grew 1.6 percent in the third quarter of 2006, down from 5.6 percent in the first quarter and 2.6 per cent in the second. The slower growth reflects lower business investment, especially in residential housing.

Real personal consumption grew at an annual rate of 3.1 percent during the quarter, up from 2.6 percent the previous quarter.

Real Personal Consumption (rounded billions)
Last 5 Years	2001	2002	2003	2004	2005
	$6.9	$7.1	$7.3	$7.6	$7.8

Real imports grew at a faster annualized rate (7.8 percent) than real exports at (6.5 percent).

Industrial production fell during the third quarter, but was up for the year.

Interest Rates

The prime rate - the rate that banks charge their best customers - increased to an average of 8.3 percent in the third quarter, up 0.4 percent for the quarter and 1.8 percent for the year.

Prime Bank Loan Rate
Last 5 Years	2001	2002	2003	2004	2005
	6.9%	4.7%	4.1%	4.3%	6.2%
Last 5 Quarters	Q3/05	Q4/05	Q1/06	Q2/06	Q3/06
	6.4%	7.0%	7.4%	7.9%	8.3%

Unemployment

The unemployment rate in September was 4.6 percent, down from August and July, but the same as in June.

The economy generated 501,000 net new jobs in the third quarter. Here's how that breaks down:

Service-producing industries accounted for all of the net new jobs reported.

Manufacturing and retail trade sectors lost employment during the quarter, but all other industries saw an increase or no change.

Industries with the largest shares of small business employment (construction, services, wholesale trade, leisure and hospitality) added 153,000 net new jobs over July levels.

The ranks of all self-employed continue to rise. In September, 5.4 million Americans were self-employed and incorporated, up from the 5.3 million reported for 2005. Over the past three years, nearly twice as many self-employed Americans operated businesses that were unincorporated as those with businesses that were incorporated.

Self-Employed (millions)
Last 5 Years	2001	2002	2003	2004	2005
Self-employed, incorporated	4.5	4.6	5.0	5.2	5.3
Self-employed, unincorporated	10.1	9.9	10.3	10.4	10.5

Business Optimism

Confidence in the economy has increased, according to findings reported by the National Federation of Independent Business' (NFIB) Optimism Index and the University of Michigan's Consumer Sentiment Survey. The September NFIB survey found more small business owners viewed the next three months as a "good time to expand" and hire new workers.

Business Bankruptcies

Business bankruptcy filings have fallen significant since the laws were revised in October 2005; and such filings are expected to be significantly smaller in 2006 than the 39,000 filings the previous year.

Business Bankruptcy Filings (thousands)
Last 5 Years	2001	2002	2003	2004	2005
	40.1	38.5	35.0	34.3	39.2

Federal Spending

The federal treasury went from a surplus in 2001 to record-breaking deficits from 2002 to 2004. The federal deficit actually shrank in 2005.

Federal Spending (billions)
Last 5 Years	2001	2002	2003	2004	2005
	$46.7	($247.9)	($372.2)	($382.0)	($3.09)

The government can reduce or eliminate the deficit by 1) increasing revenues, that includes raising taxes and tariffs; 2) decreasing spending; or 3) a combination of options one and two.

The End

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