The Economy This Week
Despite a proposed economic stimulus package, the mood among small-business owners continued to sour in January, even as they led the nation in payroll growth. Here's a look at this week's economic developments and how they may affect your business.
Small-Business Outlook Fades
Amid growing economic uncertainties, confidence among the nation's small-business owners dropped to an 18-month low in January, Discover reported Tuesday.
In a survey of 1,000 small-business owners nationwide, 74 percent said they felt economic conditions were getting worse, up from 65 percent in December. Only 26 percent rated the U.S. economy as excellent or good, compared to 29 percent a month earlier.
"Cash flow has dipped and spending on business development is down, which causes concern in this sector," Sastry Rachakonda, director of Discover's business credit card, said in a statement. It was too early to gauge the impact of recently proposed federal stimulus plans on the mood of small-business owners, he added. The survey found economic concerns ranked highest among key presidential campaign issues for small-business owners, followed by the war in Iraq.
Payroll Growth Up
Led by small firms, private-sector payrolls grew by 130,000 new jobs in January, up form 40,000 a month earlier, ADP reported Wednesday.
Businesses with fewer than 500 employees accounted for 122,000 new jobs, compared to 8,000 by larger businesses, the report said. Strong employment gains in the service sector were offset by continued losses in the goods-producing sector, which shed 11,000 jobs in January.
On Thursday, the Labor Department reported a surge in jobless claims last week, with the number of workers filing for unemployment benefits rising by 69,000 to 375,000 -- the sharpest gains since the days after Hurricane Katrina.
The largest increases in new jobless claims were in Florida, Louisiana and Illinois, while the largest declines were in North Carolina, California and Pennsylvania.
Housing Slide Continues
New residential home sales fell by 4.7 percent in December to a 13-year low of 604,000 to close out the year, the Commerce Department reported Monday.
The slowdown left 495,000 homes on the market at the end of the month, enough for a 9.6-month supply at the current sales pace. The median sales price for new homes last month was $219,200, while the average selling price was $267,300.
On Wednesday, the Federal Reserve cut interest rates by another half percentage point, citing "considerable stress" in the housing and financial markets, among other issues.