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Economy Grew More Slowly in Second Quarter

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Aug. 1, 2005--Data released this week suggested that the economy continues to grow moderately, with small businesses shaking off uncertainties ranging from growing consumer debt to international trade and security concerns.

The Commerce Department reported Friday that GDP growth slowed slightly in the second quarter, falling from 3.8% to 3.4%. William Dunkelberg, chief economist at the National Federation for Independent Business (NFIB) said that the drop had been expected and that it did not indicate a slowdown. "Small business owners remain optimistic," said Dunkelberg. Among NFIB members, "job creation numbers are solid. Capital spending plans are solid. Price pressures are easing, but profits still look good. That means everything is rolling along nicely." He added that construction, health care, and retail are particularly strong.

Separately, the Labor Department reported Thursday that new claims for state unemployment insurance rose by 5,000 compared to last week's 310,000, a small increase that was well below analyst predictions. The less volatile four-week moving average fell for the second straight week, dropping by 250 claims to 318,250. Dunkelberg said that the employment should continue to improve slowly, adding that small business are hiring at "historically high rates."

Not everyone is convinced the economy is on the right track. Ken Goldstein, economist at the Conference Board, which reported Thursday that the number of help wanted ads in major newspapers fell in seven of nine U.S. regions, takes a grimmer look at the hiring picture and believes that "the economy is poised to lose some steam." In addition, small businesses face potential speed bumps including further Chinese currency revaluations, rising levels of debt, and fallout from a possible "housing bubble," according to Barbara Bird, a professor of management at American University. "There's a high level of uncertainty," she said.

Last updated: Aug 1, 2005




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