sum2llc

assessing risk|realizing opportunities

Unemployment Driving SME Bankruptcies

unemployment-line-nyc-depressionTwo news items concerning the health of  of the United States economy crossed my desk today.  This morning ADP published its monthly National Employment Report for June.  ADP announced that nonfarm private employment decreased 473,000 from May to June 2009 on a seasonally adjusted basis. Monthly employment losses in April, May, and June averaged 492,000.  That equates to over 1.5 million jobs that were lost over the past 90 days.

The trend indicates that the rate of job losses is slowing; but the massive evaporation of jobs represents a serious erosion in buying power.  The United States is a highly developed consumer oriented economy that is highly dependent on the discretionary buying power of consumers.  Significant loss of jobs and the severe contraction of credit availability are severe headwinds that the US economy must overcome.

In recent years US job growth was fueled by small and mid-size enterprises (SME).  Home based companies, specialty retailers and service oriented companies has fueled economic expansion and job growth.  No more.  The trend has been decidedly reversed due to the evaporation of consumer buying power, credit and capital constraints and other macroeconomic factors that conspire against the limited balance sheets of SMEs.

The USA Today reports, “The first five months of this year have shown a 52% increase in the total number of commercial bankruptcy filings (36,106) compared with the same period last year (23,829), according to the Automated Access to Court Electronic Records. On average thus far in 2009, some 350 commercial enterprises file for bankruptcy daily — an increase of 240% from 2006.”

The two attributes that distinguish the US economic colossus are the work ethic of its people and a deep abiding commitment and belief in a entrepreneurial culture that rewards hard work and risk.  It would seem that these two virtues are under siege and are being stressed to a breaking point due to the depth and pervasiveness of the global recession.  One thing is clear, the indomitable spirit of the American people are being put to the test.  In time this great nation of great people will rise to meet and surmount the challenges posed by this great recession.  It remains to be seen however how this will change the spirit and character of the American psyche and how future generations of countrymen will view the generations that left them with a debt laden legacy.

You Tube Music Video:  George Gershwin, Three Preludes, #2

Risk: work ethic, entrepreneurial spirit, economic recovery, depression

July 1, 2009 - Posted by | Uncategorized | , , , , , , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: