Small Business Insider
By Karen Kerrigan-
The 2019 Economic Report of the President was released by the Council of Economic Advisors (CEA) on March 19. The purpose of the report, mandated by the Employment Act of 1946, is to provide Congress with “timely and authoritative information concerning economic developments and economic trends.” This year’s edition is replete with compelling data and charts that demonstrate the strength of the U.S. economy, along with indicators and trends that point to future growth.
The trends and numbers show healthy levels of private investment, wage growth, new job growth, an uptick in new business creation, more people re-entering the labor market, and U.S. energy dominance, among other important developments for the economy.
This year’s report also includes a few interesting chapters. For example, Chapter 8 focuses on “Markets vs. Socialism” in response to limited yet loud voices who are pushing for massive government intervention into markets and the private sector at every opportunity. The report quantifies the human and economic costs of socialism and looks at “moderate degrees of socialism.” For example, the CEA estimates that socialized medicine through enactment of “Medicare for All” (financed by higher taxes) would reduce GDP by 9 percent, or $7,000 per person, in 2022.
As outlined in the report’s introduction, “the strong economic performance in 2017 and 2018 was not merely a continuation of trends already under way during the post-recession expansion, but rather constituted a distinct break from the previous pace of economic and employment growth since the start of the current expansion in 2009:Q3.”
And specifically, “investment, manufacturing employment, worker compensation, and new startups have all risen sharply in the two years since the 2016 election.”
The bottom-line is that pro-growth policy has produced these solid results and favorable circumstances for more growth.
All of this is good news for entrepreneurs and small businesses, and for the growth of entrepreneurship in the U.S. And, as SBE Council has been asserting through our advocacy work all year, continuous improvement in the policy environment is always needed to sustain and nurture strong economic growth, and would certainly help to fuel the positive trends highlighted in report. (See SBE Council’s 2019 Policy Agenda for Entrepreneurs and Small Business here.)
The charts below, courtesy of the CEA, were developed from their own Annual Report together with the 2019 Economic Report of the President. They tell the story of solid growth and trends for our economy, and in turn entrepreneurs and small businesses. To access the report in its entirety, click here.
Economic Growth
Real GDP grew 3.1 percent during the 4 quarters of 2018, and was the fastest Q4-to-Q4 growth since 2005.
Deregulation and Savings for Business
Regulation disproportionately burdens small businesses. Actions taken by the Administration and Congress to balance federal regulatory activity, streamline red tape, reduce burden and produce smarter regulation has created an enabling environment for investment, entrepreneurship and small business growth.
Business Investment is Solid
Investment is critical to economic growth, productivity and wage growth. And as demonstrated by the chart below, investment by independent businesses increased following the passage of the Tax Cuts and Jobs Act (TCJA).
New Business Creation Up
According to CEA data and the Economic Report, “new business creation” is on the rise. The sizable increase in Employer Identification Number (EIN) applications is a very positive sign for the economy, as entrepreneurship has remained weak for an extended period of time and startups among millennials has been especially weak. Entrepreneurship is critical to economic dynamism, innovation, wealth creation, healthy job growth and U.S. competitiveness. The solid increase in “high-propensity” business applications (firms with a payroll) is also a very positive trend.
Wages are Rising
Small business growth, investment and opportunity are driving wage growth. It’s a great time to be an American worker.
Workers are Coming Off the Sidelines
This positive development needs to continue, as the workforce shortage and access to skilled employees is a top issue for small businesses – indeed all businesses. Many small firms across industries are “leaving business on the table” and can’t take advantage of expansion opportunities, as they cannot find/hire the employees they need to grow. Strong economic growth, reforms to our educational system and the workforce skills training ecosystem – as well as a cultural shift that values all work – will help to bring more workers “off the sidelines” and provide our economy with appropriately-skilled workers who can succeed.
Unleashing American Energy
Did you know that America’s small businesses and entrepreneurs play an enormous role in the U.S. energy sector? For example, 89.6% of employer firms among oil and gas extraction businesses have fewer than 20 employees. (Read more facts about the role of small business in the energy sector here.) Energy independence, and U.S. energy dominance, mean more stability and certainty when it comes to supply and prices, and more innovation, quality jobs and economic growth and security for the United States.
A Healthier Lending Market
Access to financing through traditional banking institutions is much healthier. This is great news for small businesses that require working and expansion capital to scale their firms and take advantage of expansion opportunities in the growing economy.
