The Small Business Massacre

Not Good News

David Goldman appeared on Larry Kudlow’s CNBC program to discuss the “massacre of small business”. Policymakers have belabored the point that small businesses have led job creation in all post-war economic recoveries. That is not the case now as job losses at small businesses exceed those of large ones. Goldman pointed out that the household survey, based on telephone interviews with a large sample of randomly chosen households, shows that 558,000 Americans lost their jobs in October, but large businesses reported a decline of only 190,000 jobs. So small businesses are disproportionately affected by the economic downturn, doubtless due to the contraction in commercial credit. Business lending is down 13% year on year and according to the recent report of the Federal Reserve Bank, most banks continue to “tighten lending standards”.  Small businesses are choked of credit as all lines, including home equity and credit cards, are tightened. Without access to capital, small businesses fail. Indeed, Moody’s reported that the global speculative default rate is at 12%, an all-time high since the Depression. The capital access disaster is exceeds all natural disasters in severity, owing to bad economic policy.