The massacre of small business
Good point from David Goldman:
The big issue in the US economy is the massacre of small business. That’s why the household survey shows that 558,000 Americans “became unemployed” during October, while the establishment survey of payrolls shows a decline of only 190,000 jobs. The establishment data, which are collected from larger businesses, are more reliable; the household survey is based on telephone interviews with randomly-selected households. But the numbers are so large as to make clear that small businesses are shutting down.
With commercial and industrial lending by American banks down 13% since September 2008, and most banks continuing to “tighten lending standards” in the Fed’s official poll, this is not surprising. Wal-Mart will make it through a recession; not the tea-cozy shop down the mall corridor, much less the real-estate agency in the half-abandoned exurb. The global speculative grade default rate, as Moody’s reported this week, has risen to a post-Great Depression high of 12%. Credit lines for small businesses (including home equity, credit cards, and all the other devices entrepreneurs use to fund themselves) will continue to shrink.
Me: By the way, one-third of the revenue from the surtax in the House healthcare bill would come from small business.