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Thursday, April 3, 2014

Insights Into the Mindsets and Moods of U.S. Microbusiness Owners

By Joe Daly, Senior Managing Consultant

Nearly one in three microbusiness owners depend on a second job for most of their income and 60% have used personal savings to finance their business. Despite often having to work two jobs and invest their own money, 69% of microbusiness owners say they have the ideal job.

These findings are from the Sam’s Club/Gallup Microbusiness Tracker, a new, nationally representative survey focusing on the smallest U.S. businesses -- those who employ fewer than five employees. The Microbusiness Tracker provides valuable insights into the moods and mindsets of microbusiness owners by highlighting the unique concerns and challenges faced by microbusinesses -- a key driver of economic growth -- along their path from startup to maturity.

“Sam’s Club has served microbusiness members for more than 30 years,” said Rosalind Brewer, President and CEO of Sam’s Club. “With the Microbusiness Tracker, we want to give a broader, national voice to microbusiness. We believe these vital community businesses and the challenges of these entrepreneurs aren’t always represented in the small business discourse.”

“Microbusinesses are often confused with small businesses, and it is important that not only owners themselves, but also policymakers, understand the unique challenges that microbusinesses are facing,” said Sangeeta Badal, Ph.D., Gallup’s lead researcher for entrepreneurship and job creation. Data from the Sam’s Club/Gallup Microbusiness Tracker will aid policy and decision-making at the national level and provides real, actionable insights for microbusiness owners,” added Badal. 

The Sam’s Club/Gallup Microbusiness Tracker monitors the basic mood, preparedness, and state of mind of microbusiness proprietors. The Microbusiness Tracker taps into microbusiness owners’:

  • Readiness to meet the day-to-day challenges of being a business, their confidence in the future of their business, and their suitability for the job. For example, the Microbusiness Tracker finds that nearly one-third (30%) of older microbusinesses -- those more than three years old -- are experiencing flat revenue growth and are more likely to be letting employees go compared with newer microbusinesses.
  • Unique concerns and needs with regard to issues such as work/life balance, their financial situation, access to credit, and keeping up with changes in the industry. While the day-to-day management of their business dominates much of their time, microbusiness owners are more likely to say they want to spend more time serving customers (34%) than taking personal time off (25%) or planning for the company’s future (21%).
Additionally, Sam’s Club and Gallup will explore special topics of interest to microbusiness owners. Gallup will report on findings from the Sam’s Club/Gallup Microbusiness Tracker on a quarterly basis.

Read more about microbusiness owners’ unique concerns in the article, “Many U.S. Microbusiness Owners Depend on Second Job,” and sign up for Gallup News alerts to get the latest articles based on findings from the Sam’s Club/Gallup Microbusiness Tracker as soon as they are published.

Tuesday, November 19, 2013

Christmas Spending Further Explained

By Lydia Saad

Some media coverage of Gallup’s recent Christmas spending article has focused exclusively on the decline in Americans’ average spending intentions in dollars, from $770 in November 2012 to $704 today. However, this overlooks our analysis of the data in the same article, saying the decline merely points to a lower-than-average increase in holiday retail sales, not a decline in overall retail spending. Specifically, the data predict a 1.7% to 2.4% increase in holiday retail spending this year.

How can this be?

For one thing, the population has increased, as it does every year, so even if individual Americans spend less in 2013 than what they spent in 2012, the number of people spending money will be greater, thus somewhat offsetting this year's decline in average per capita spending. Population growth is also a key reason actual holiday retail spending almost always rises -- what varies is the degree. According to National Retail Federation, the average increase in holiday retail spending over the past decade has been about 3%. In a good year, sales will rise by 4% or better, and in a not-so-good year, by 2% or less. Then there is the singular case of 2008, when holiday retail spending actually declined by 4.4% amid the U.S. financial meltdown -- making that an undeniably bad year.

Additionally, Americans’ predictions of how much they will spend on Christmas gifts is as much an attitude as a factual report. Thus, while it may reflect specific budgetary plans, there is also an emotional component to the number -- essentially measuring consumers’ holiday spending mood. When consumers feel confident about the U.S. economy and comfortable financially, they are more likely to give Gallup a robust holiday spending prediction, possibly overstating what they will ultimately spend once they see the bills piling up. When they have the economic or financial jitters, they are more likely to respond conservatively, yet perhaps splurge once they are confronted by a festively decorated mall.

Given these factors, Gallup finds there is not a one-to-one correspondence between the year-to-year change in the dollar amount that individual Americans say they will spend and the percentage change in total holiday retail sales (as calculated by the National Retail Federation). However, there is a fairly strong relationship between the magnitude with which Americans’ dollar-estimates increase or decrease each year, and how much actual retail spending grows.

Gallup’s regression models that compare Americans’ annual November estimates of what they will spend on gifts to actual retail spending over the past decade point to weak growth in 2013 holiday sales -- as noted, in the 1.7% to 2.4% range. While certainly below average, this range is far from the retail disaster that occurred in 2008, and that, to some degree, may have reset retailer expectations for what “good” and “bad” even mean.

The following chart aligns the two trends. Note that, aside from 2008, in years when the Gallup spending estimate was significantly lower than the year prior (2000, 2001, and 2002), the rate of increase in holiday retails sales was positive, but consistently below 4%. This is the comparative group for Gallup’s latest spending estimate, given this year's $66 decline in expected spending compared with last November.

Finally, Americans’ estimates of what they will spend fell sharply over the past month, from an average $786 in early October to an average $704 in early November. Thus, in our latest report, we highlighted that consumers had trimmed their spending plans, whereas in our October report we had talked about “cautious optimism” for retailers. It’s possible that as the country moves further past the political turmoil of October, and if the bull market on Wall Street continues, consumers’ spending intentions will rebound. Gallup’s early December update will thus provide an important final look at how this year’s holiday shopping season is shaping up.

Friday, September 27, 2013

In Memory of Dennis Jacobe

By Frank Newport, Gallup Editor in Chief

Dr. Dennis Jacobe, Gallup Chief Economist, author of this blog, respected consultant to businesses and corporations across the country, and featured author of Gallup economic stories, passed away on Friday, Sept. 20, 2013. Dennis was a close friend of myself and many, many Gallup associates and clients, a brilliant economic thinker and strategist, a person of integrity and acute insight, and a great human being.

Dennis was born in Pennsylvania, received his Ph.D. in economics from Virginia Tech, and was living near Salisbury, N.C., at the time of his death. Dennis is survived by his wife, three children, and five grandchildren. He has been Gallup’s Chief Economist since 1994. Prior to that he was a college professor, held leadership positions with the U.S. League of Savings and Loan and the Financial Research Institute, and served in the U.S. Army.

We will all miss Dennis a great deal, and I know that readers of will miss his insights and observations on the fast moving U.S. and world economy.

Wednesday, July 31, 2013

Fed Should Target Full-Time Jobs, Not Unemployment

All eyes are focused on Friday's July unemployment report as financial pundits debate how the Fed and markets will respond to various job scenarios. This focus is routinely reinforced by such events as Fed Chairman Ben Bernanke's recent semiannual report to Congress, in which Bernanke restated that the Fed is targeting a 6.5% unemployment rate for monetary policy -- and this likely will be reiterated by the FOMC (Federal Open Market Committee) statement after its meeting this week. Instead of supporting the traditional unemployment measures, the Fed should be leading the way to a new national focus on full-time jobs -- not unemployment -- and can do so simply by targeting a measure like Gallup's P2P (Payroll to Population) as its unemployment or jobs target.

Gallup's P2P, at 44.6% in late July, shows essentially no change in full-time jobs compared with June. It also reflects a slight drop from recent years, including the 45.0% of July 2012 and the 44.9% of July 2011. While this lack of job improvement over the past couple of years may not be much of an endorsement of the Fed's efforts to stimulate job growth by aggressively flooding the economy with liquidity, it seems fully consistent with the slow-growth economy most Americans have been experiencing.

Gallup's P2P reflects the percentage of the U.S. population 18 or older that is employed full time by an employer for at least 30 hours per week. The P2P is based on Gallup Daily tracking phone interviews conducted randomly with 30,000 Americans on a monthly basis.

Further analysis shows that younger Americans are suffering the brunt of the decline in full-time jobs that has taken place since mid-2010. In turn, this suggests that growing full-time jobs for younger Americans may be a much-needed secondary target for Fed policy.

Fed Can Change the Focus to Full-Time Jobs

The current government job measures leave a lot to be desired in terms of face-validity. For example, Bernanke noted in his testimony to Congress that the Fed's unemployment target may need to be adjusted, depending on the labor participation rate. A declining participation rate can artificially lower the unemployment rate as job seekers give up looking for work, while an increasing participation rate can do the reverse.

Similarly, the establishment survey can be distorted by a surge in part-time jobs -- a factor that may need to be considered when one evaluates Friday's report. Part-time jobs not only count as new jobs for this survey, but if an American having one part-time job adds an additional part-time job, it counts the same as the creation of a new full-time job.

As a result of these and other distortions, the job numbers in Friday's government report are likely to be "spun" to align with Wall Street sentiments -- but not necessarily provide a real insight into whether the job situation is actually getting better or worse for millions of Americans. By providing leadership -- discounting Friday's numbers and instead revising its target to full-time jobs -- the Fed can go a long way toward fixing this situation. If the Fed shifts focus, Wall Street as well as the political pundits are likely to simply follow the Fed's lead to a better jobs measure.

Full-time jobs are essential because they create financial stability and open the gateway to new household formation and homeownership. Full-time jobs also provide job experience and the opportunity to learn, grow, and advance in the workplace. That is, full-time jobs are essential if the U.S. is going to have an upwardly mobile society that provides the opportunity for every American to succeed.

Wednesday, July 3, 2013

June Jobs No Better Than a Year Ago

Recent history shows the government's jobs report is not only unpredictable, but also subject to considerable Wall Street spin. In this way, May's weak numbers showing the unemployment rate increasing to 7.6% became a "Goldilocks" report.

While the same type of spin may be applied to the government's June report, to be released on Friday, Gallup's private-sector monitoring of the jobs situation shows no improvement in full-time Payroll to Population (P2P) between June 2013 (44.8%) and June 2012 (44.9%). Further, Gallup's workforce participation rate suggests more Americans are joining the workforce this year, and the government is not picking up the increases, meaning the unemployment situation may be much worse than now recognized.

One reason Gallup finds no improvement in the employment situation is the workforce participation rate -- the percentage of Americans in the workforce. June's 68.5% matches the highest participation rate Gallup has seen since continuous monitoring began in January 2010. Gallup's participation rate surged to 68.5% in April 2013 from 67.7% in March. The metric has remained at this high level for the past three months, and exceeds levels seen at this time in 2012 throughout the second quarter.

The government reported its lowest unadjusted participation rate of the year in March and April at 63.1%. This increased in May to 63.5%, trailing the surge in participation Gallup picked up in April. The government's participation rate is lower than Gallup's for a variety of methodological reasons, and these differences may also explain why the BLS participation rates continue to trail those seen in 2012 on a monthly basis.

Seasonally adjusting the participation rates, government reports show slightly higher numbers. These adjustments also reduce the change in the participation rate -- for example, May's adjusted rate of 63.4% is up only marginally from the 63.3% of April.

Private Sector Monitoring Is Better

Gallup's P2P measure tells us that the slow U.S. economy of 2013 has barely created enough jobs to keep up with population growth over the past year and has not produced enough jobs to get Americans back to work. Seemingly good news for those hoping the Fed will continue pouring money into the economy; likely bad news for those hoping for a stronger economy in the second half of 2013.

Further, the increase in the participation rate suggests the real job situation is getting worse as Americans who had dropped out of the workforce seek to re-enter. This is consistent with the high levels of economic confidence Gallup has been seeing and the general increase in optimism about housing.

Still, jobs are essential to economic growth, and the key to improvements in consumer spending and housing, particularly, when interest rates are increasing and the markets are volatile. In this regard, the government data on jobs leaves a lot to be desired in both face-validity and consistency. Gallup's P2P provides a private sector alternative -- based on 30,000 monthly phone interviews having the best possible survey design. Maybe the time has come for the markets and policymakers to recognize that private sector efforts like the P2P may be just as accurate -- if not more accurate -- than the government's measures.

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