Saturday, February 5, 2011

Gallup Poll: Small Businesses have weak marginal gains

Notice that producers collapse before consumers.  The chart constructs the ratio, CPI/PPI.  The denominator, PPI, spiked first,  causing the economic collapse, then the PPI fell as consumers and proucers cut back on energy, mainly. Producer gains are restored, but at the New Contracted Normal. Notice producer prices still rise faster than consumer? Consumers adapt better to resource constraints.

So today, when Gallup asked small employers why they are not hiring, their answer are consistent with the low gains from production, they find business would be willing to hire and expand, but their business model does not support the current resource constraints. 

When Jim Hamilton worries about the share of energy in the consumer budget, he has it wrong, look at the share of energy in the producer budget,  producers collapse first.

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