Just an Observation - Economic

[JohnyMac]

I run a little consulting business in-between all of the other things I am doing so take this for what it is worth...

I know four local small businesses intimately and they are failing.

On the average it all started about October while one a local hardware store started its decline in early summer. 

All are FAILING at a dramatic pace.

The hardware store has gone from an annual top line revenue of ~$1M with a modest 5% EBITDA to a top line year end forecast of ~$650K with a <2%> EBITDA.

The two restaurants are now up for sale and are struggling to pay vendors with a negative EBITDA too. Both businesses have laid off all marginal essential employees and the owners are now putting in +80 hrs weeks to pick up the slack.

The last business is a fishing/gun/hunting business and I have recommended that he stop taking in firearms on consignment or trade as his inventory is out-of-control. ALL of his inventory is bursting at the seams and he is moving very little inventory other than ammo.

So what is going on? It seems that business has slowed down to molasses in January. 

How are things where you are?

 

[Jackalope]

Locally, we've had a number of new businesses open.  However, there's also been some wealthier business people who have had their properties go up for county tax sale due to lack of capital, or due to cash flow issues.  I've also seen buildings that in the past have been retail businesses convert over to service type businesses, i.e. drug rehabilitation centers, or doctors offices.  And I've seen doctors offices, and insurances businesses close.  I do not see any resurgence in the local economy. The local town is slowly dying, as evidenced by the student population.  My son graduated from high school in 2008 with about 80 kids in his graduating class.  The class of 2017 has around 40 students.  Yet our school taxes continue to climb....

[Kbop]

its about the same here.  The company i work for has had several layoffs - so far i've dodged them.
several small businesses in my locality have shuttered or are in the red.  I don't know from my perspective if this is the - "creative destruction" i've heard about, at work - or if things are actually slumping.  I know that it isn't uncommon for one area to have a slump while a few miles away are doing better.  It does feel odd.

so the stock market is up and unemployment is down. 

[Jackalope]

I don't think unemployment is down,  the more likely situation is that more people have given up on their job searches, which skews the job numbers.  I would take the government's job statistics with a very large grain of salt, and consider alternative explanations for their figures.  In my little piece of the world the official economic statistics do not reflect reality.

[Nemo]

Around here about every retail business has a help wanted sign in the window.  From major chain dept stores to local 1 or 2 site mom/pop stores or restaurants.

I mean the oil change chains to dads car repair place.  Nearly every one of them.  I cannot believe it.

If its an indication of how the economy will be going in the next year or 3 you better get in, sit down, buckle up, shut up and hang on with hands and feet.*

Nemo

*but is it great big boom before a nuclear size bust?

[JohnyMac]

Oh yeah, I do not trust .gov's numbers at all. I am skeptical of the U6 numbers too.

I predict that because there is a Republican President coming on the scenes in January, the fed will start to raise interest rates, inflation will return and unemployment will start to creep up.

Chris Martenson (Economist) has predicted that the earlier part of 2017 there will be a deflationary period so retailers and manufactures can off load some of their "hard goods" inventory. Then we will move to high single to low double digit inflation towards the end of summer beginning of fall.

Remember to post your 2017 predictions in the appropriate subject line. I will compile and we can vote for them in the beginning of January.

On the other hand, due the forum a favor and keep an eye on the small businesses in your village, town or city. Specifically look for closing's and opening's. I suspect after Christmas you might see some closed businesses in your AO.

[Well-Prepared Witch]

We had a small (but very typical for the mortgage industry) slump at the end of November and beginning of December, but we're picking up.  I'll be interested to see how people react to the rate rise today.

I see a LOT of "help wanted" signs when I'm out and about, but I know many of those are for seasonal help.  I haven't seen any signs of more-than-usual business closures, but I have noticed that there are not as many for-sale signs going up.  Still a lot of houses on the market, but they don't seem to be sprouting from every yard.

[JoJo]

 JohnyMac can I borrow your crystal ball. The Fed today eaised the rate 1/4 point and Yellan said she might raise it three more times in 2017.

[JohnyMac]

LOL JoJo. The FED had to raise the interest rate. It is WAY over due. They were just being pressured by the White House to not do so until Mr. Obama left office.

My crystal ball tells me it will be in the 6%+ by the end of 2017. No 1/4 point here or a 1/4 point there. Anyhow, 6% is a totally doable number and reflects a vibrant economy. Heck my first mortgage rate we 12% back in '87. My second house purchase was 7.1% back in '97.

Now, watch all of the .gov numbers too, e.g. unemployment, inflation, et cetera, go the wrong direction. 

[Nemo]

Keep in mind a significant portion of the Unemployment rate does not consider those who are no longer in the workforce and looking.  That includes those who have run out of unemployment benefits and not have a job yet or have no job and not tried to claim benefits.

The real rate with those numbers included it about 10%.

Nemo

[JohnyMac]

Yup Nemo, U-3 does not take into account folks who have given up on trying to find a job or are working under the table. The U-6 number is closer to the truth not 100% accurate but closer.

[Nemo]

Like some here, I really think the sit down, shut up idea needs to be expanded beyond what I stretched out of it above. 

Make it:

Get In
Sit Down
Shut Up
Buckle Up
Helmet Up
and Hang On With Hands and Feet.

Cuz I really still think its coming.  Particularly if Trump begins making significant (cannot say progress but you know what I mean) strides toward getting the policies we desire headed in a reasonable direction

Nemo