-Recent reports show business owners and those who hope to become one (wantrepreneurs) may be a dying breed.
First some wonky background: It’s important to understand why things are changing. Technically, the U.S. economy is in “recovery”. However, most economists agree growth is anemic and vulnerable. 2014’s first quarter GDP was a mortifying 0.1%, surprising most everyone. Forbes called the growth “glacial”. And then we learned that pathetic number was too optimistic! The economy actually contracted to -1.0%. Now just this week that number was revised yet again to -2.9%.
This is the lowest Q1 GDP in 32 years.
Point of reference: the economy needs to be at 3.0% to 3.5% just to maintain current employment levels – or 6.0-6.5x current GDP!
Why’s the number so low? Three factors are having a profound impact on the economy:
- Less than six years from the greatest financial crisis of our time, many are concerned about the potential of another crippling event. Banks aren’t lending, small businesses aren’t spending. Fear is based on, but not limited to: Political instability (home and overseas); U.S. debt (over $17.5 Trillion); possible contagion from troubled countries (a slowing China). Federally backed massive student loans, etc. Susceptibility can be triggered by a single event, collapsing a fragile house of cards.
- The Federal Reserve has the economy addicted to the drug of our time: cheap money – the catalyst for the bullish markets. Many suggest the ‘bubble’ will pop when the Fed discontinues Quantitative Easing. (Q.E. in short form= Fed prints money, buys bonds from banks hoping money ‘trickles down’ into economy). When Chairwoman Janet Yellen speaks the markets pause. Q.E. is an unprecedented experiment with no clear exit or endgame. A stock market crash would impact consumer confidence, stopping spending likely causing a recession.
- Increased regulatory and tax policies. Federal and state governments have created blockades to small business, entrepreneurs and start-ups impacting the number of new businesses formed. According to the House Committee on Ways and Means, there are over 80 million hours of rules and regulations that American businesses and families have to comply with.