Editor’s note: In Part 1 of a two-part series, Andrew Moran interviews economist Carol Roth on the challenges faced by small businesses in the post-crisis period. It’s gloomy, but there is a little silver lining.
The last two years have seen a heavy bombardment of lockdowns, restrictions, limitations, organized retail crime, and inflation. The ongoing war on small businesses since the coronavirus pandemic started resulted in tens of thousands of companies closing their doors permanently. Although entrepreneurial rates are rising amid The Great Resignation, scores of smaller outfits have left the post-crisis recovery. In this type of environment, it is an eternal struggle to compete when the cards are stacked against your retail store, factory, or coffee shop. But is it time to be optimistic? Carol Roth, the author of The War on Small Business and prominent American television personality, talks with Liberty Nation about the democide inflicted on US small businesses.
Is It Morning in America for Small Businesses?
The National Federation of Independent Business (NFIB) optimism index revealed that sentiment among US small businesses tumbled for the third consecutive month in March, falling to 93.2 points, one of the lowest levels of the public health crisis. From rising prices to the global supply chain crisis, the net share of owners anticipating better market conditions in the next six months declined to a 36-year low.
Does this suggest that it is time for the small business community to begin purchasing a lifetime supply of Pepto Bismol and razor blades? Not entirely because entrepreneurs are optimistic by nature, said Carol Roth, a regular guest on CNBC, CNN, Fox News, and MSNBC.
“If you are a small business owner, you’re going to find a way to get, or try to find a way to get, through this very difficult time,” Roth told Liberty Nation.
At the same time, there is not a lot of good news for private companies in today’s marketplace.
Small businesses have been a casualty of the COVID-19 calamity from the very beginning, Roth explained. In addition to experiencing violations of private property rights, many of these smaller firms did not possess the balance sheets or wherewithal to endure “these insane policy decisions” that led to rising inflation, a transformed labor market, and disruption in the worldwide supply chain. While Big Business could survive whatever was being hurled at them, mom-and-pop shops could not sustain operations. Everything that is now happening is just “crushing” small businesses.
“If you’re a larger company, you can kind of rationalize, you might be able to cut back in certain areas or maybe shut down an under-performing location,” she stated. “If you’re a small business, you may only have that one location to contend with. You may not have the extra capacity. You might not have the ability to pass along price increases to the customers. So, all of the challenges the small businesses went through and just taking one after another on the chin, it’s just been a really, really tough time.”
This explains why all the surveys show small business optimism wavering, Roth noted.
If small businesses cannot afford to employ the same measures as their larger counterparts to keep the doors open in this inflationary environment, how are they responding? Assessing the situation is vital for some entities because it can be a big challenge to raise prices perpetually.
A restaurant might, for example, alter its point-of-sale (POS) system, pre-pay for products to lock in prices that are expected to increase, and purchase in bulk, averred Roth. Finding labor to fill much-needed positions has also become difficult to accomplish.
“It’s interesting on the hiring front, it’s not so much letting people go as it is a hiring freeze. We have a very big dislocation in the labor market. Now, 1.8 jobs available for every one job seeker who’s out there,” she said. “It’s not that they are letting personnel go because they couldn’t find the personnel to begin with, but they may be looking for some optimization.”
Bullish or Bearish on the Morrow?
(Photo by Alexi Rosenfeld/Getty Images)
Indeed, a ubiquitous and significant trend throughout the economy these days is that many Americans believe that prices are higher than what is being reported and will continue to remain elevated longer than what the government forecasted. According to the Federal Reserve Bank of New York’s (FRBNY) Survey of Consumer Expectations, Americans’ one-year inflation projections are at around 6%. With the consumer price index (CPI) and the producer price index (PPI) as high as they are, in addition to the US central bank engaged in a tightening cycle, Wall Street is growing the odds of a recession.
But there is a silver lining to the dark clouds, contended Roth: a supply-demand imbalance.
“If we go into recession, we’re not gonna be seeing people losing their jobs in the same way that you would have in a normal environment with a normal labor market,” she added. “So, that’s like a very little silver lining, but we’ll cling to anything that we can right now.”
Part 2 of this in-depth interview discusses the “magic money tree” that contributed to spiraling inflation.
