Morning Report: Small Business Optimism declines.

Vital Statistics:

  Last Change
S&P futures 3675 -15.6
Oil (WTI) 45.38 -0.34
10 year government bond yield   0.91%
30 year fixed rate mortgage   2.82%

Stocks are lower this morning as hopes for a stimulus package fade. Bonds and MBS are up.

Small business optimism declined in November according to the NFIB. “Small business owners are still facing major uncertainties, including the COVID-19 crisis and the upcoming Georgia runoff election, which is shaping how they’re viewing future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses.” The bright spot remains labor markets with a net 20% of firms raising compensation. 89% of employers said that finding qualified employees was difficult.

Productivity in the third quarter was revised downward to 4.6%. COVID is introducing a lot of noise to these numbers. Unit Labor Costs fell by 6.6%.

Mortgage delinquencies rose in September to 6.3% compared to 3.8% a year ago. “Although delinquencies remain high, it’s clear the economy has passed an initial stress test. High home equity balances and structural protections put in place as a result of the Great Recession contributed to surviving this test. Housing demand remains strong, and rates low, which provides optimism that the housing market will continue to be a bright spot in this COVID-ravaged economy.” The hardest-hit states for delinquencies are Louisiana, Mississippi, New York, New Jersey, and Florida.

Redfin sees the housing economy absorbing any COVID-19 related foreclosures with relative ease. “In my experience selling foreclosed properties, some people don’t take advantage of forbearance because they aren’t educated on what it entails,” said Redfin agent Gina Sapnar. “There are people who are in forbearance who don’t understand how repayment works. For some people payments are tacked on to the end of the loan, but for others it may be a large payment due immediately at the end of forbearance as a lump sum, which could be very tough for people to repay. Some homeowners are underwater because they took on more debt than they could handle. I know of a restaurant owner who took equity out of his home to pay his workers during the pandemic. There are people suffering who have depleted their entire life savings, are drowning in debt and they aren’t paying their mortgages. But even those people have options. The lenders are really trying to work with occupants and educate them on how to avoid the scarlet letter of a foreclosure.”

The demand for homes is so insatiable that the excess supply will be taken up quickly.

31 Responses

  1. It was past time for small biz optimism to decline.

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    • Why though? Vaccine here, Trump out of office in January. Why isn’t it shooting up?

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      • The aid for struggling small biz has dried up and the plight will continue for many months, so the signs of a reluctant Congress on continuing aid to small biz now have hit home.

        This could turn around with a new aid package aimed at the hardest hit [obviously restaurants, bars, cinemas, etc.]

        If vaccines are effective by summer one more aid package would probably get it done.

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        • “Why isn’t it shooting up?”

          Lockdowns and other restrictions are back.

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        • It is both. The reason they passed the first stimulus was so that small biz could afford a temp shut down. That money is gone. Shut downs are back, this time with a light at the end of the tunnel. A short term stimulus now would do wonders. Opening up would not, in high spread areas.

          I don’t understand how an outdoor restaurant in LA that has really tried to be safe has to shut down while the movie industry stays open to film in a location across the street. Of course I do understand. $$$.

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        • Mark:

          A short term stimulus now would do wonders. Opening up would not, in high spread areas.

          Why do you think spread would eliminate the obvious economic benefits of opening up?

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        • Restaurant Assoc. says 10K restaurants will close in next three weeks without renewal of stimulus [I realize a lobby might paint a worst case picture but you get the drift]. Part of the issue, Scott, has been that even while open traffic is way down, because a major portion of the population is not choosing to eat in restaurants or go to bars during the pandemic. This is a rational personal choice for many millions of us. In high spread areas it becomes rational for more persons than in low spread areas.

          I am in a Monday evening men’s group and a Friday breakfast group. We have not met since late March – the Friday group is still meeting on Zoom. That is 6-8 customers nine times a month – retired old fuckers, sure – gone. Our fave cafes may not be here when we can get back next summer.

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        • Mark:

          Part of the issue, Scott, has been that even while open traffic is way down, because a major portion of the population is not choosing to eat in restaurants or go to bars during the pandemic.

          There is no doubt that covid itself will have an impact on businesses like restaurants, but the dire economics of the last 9 months is almost entirely due to government policy, not the disease. If the voluntary loss of traffic was so calamitous, there would be no reason for government enforced shut-downs in the first place!

          Your original suggested that more stimulus was needed because shut downs are back. I think the implication of that is correct…more government required shut-downs are the primary cause of small business economic woes. So the solution is…stop the shut-downs. Spread is not the problem, shut-downs are.

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        • Part of the issue, Scott, has been that even while open traffic is way down, because a major portion of the population is not choosing to eat in restaurants or go to bars during the pandemic.

          I think part of that issue is either changes to the eating environment (I don’t want to eat outside) or a general uncertainty about what’s open when and why. Or worry about maximums. Not wanting to have to make a reservation. Etc. Even straightforward safety protocols can create friction that will keep business down.

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        • If Trump’s handling of Covid was the problem, the optimism should be going up, that’s what I don’t understand. Needing aid certainly wouldn’t be indicative of optimism. It’s just that optimism is forward looking.

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  2. For Scott’s running list:

    “Bar owner in Los Angeles CA is livid to see that mayor Garcetti has approved an outdoor dining area for a movie company directly across from her outdoor dining area (which was shut down)”

    https://forward.com/opinion/459819/what-david-sedaris-failed-joke-exposed-about-liberals-after-trump/

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    • The point about how the press generally has become a reflexive oposition to anything outside their own elite bubble (and, by definition, not interested in “news” or “facts” as once definied) is a good one, I think.

      The way reporters now perform obeisance to Biden is grosser than the way they reflexively challenged Trump. IMO.

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      • I think the idea that the press should have let Biden slide in the general and that they were somehow going to hold him accountable later is one of the biggest fantasies I’ve ever seen propagated:

        “Once it was clear Biden would become the nominee, everything suddenly became relative – to Trump. So the press corps’ docile stance was largely appropriate. I was initially more worried that reporters might repeat the journalistic failure of 2016: blowing Democratic mini-scandals out of proportion, while underplaying Trump’s unbound corruption and tragic incapacities, to create the appearance of balance.

        But Trump’s clueless and disastrous response to a deadly pandemic – on top of his unhinged lies and some excellent investigative reporting on his finances — made that kind of false equivalence implausible even for the most jaded political journalists. The few attempted Biden gotchas fell terribly flat.

        It was not Biden that the Washington press corps needed to hold accountable. Biden simply was not the story.

        But all that changes if and when he becomes the president-elect.

        The second he is declared victor – or, given how long that could take, perhaps even once all the votes are cast – political journalists should be holding him to the highest possible standards of transparency, logic, and clarity.

        They should be demanding detailed statements about policy and personnel so we can hold him accountable going forward.”

        https://presswatchers.org/2020/10/if-biden-wins-political-journalists-have-a-lot-of-catching-up-to-do/

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        • Concur. That was never going to happen. If someone actively tries to make it happen without editorializing about how it’s a witch hunt, I expect they will face a lot of opprobrium.

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    • jnc:

      For Scott’s running list:

      That was the woman whose tweet I linked to yesterday.

      But the article you linked was really good, and spot on.

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      • You should follow his Twitter feed. Same group as Greenwald and Taibbi.

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        • Thanks but no Twitter-following for me. I put it in the same category as having a Facebook account, a NYT or WaPo subscription, or watching the NFL or NBA.

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        • I got a Twitter account back in like 2006, I think. When it was brand new. Had that account although used it rarely for 14 years. Just went through the extra effort to delete it a month ago. Have to keep Facebook so I can check on something if my wife wants me to, but otherwise I don’t use it.

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        • That’s fine. I’ll share the good ones here. Like this one:

          The best part is he’s a disillusioned former Obama campaign staffer.

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  3. NoVA, you see Fat Man yet?

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    • I did. give a B.
      it was a bit disjointed in parts, and something was missing to pull it all together, but overall, i enjoyed it.

      you?

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      • Yes, I liked the ending and the fact that it became something of a morality tale.

        It did end up being a bit bloodier than I thought it was going to be. The pet hamster was a nice touch.

        I thought it would have been interesting if they had added a line about Claus giving the hitman a toy cop car as a kid as a way of trying to steer him to become a cop to help abused kids like himself since he had such good detective skills, etc, but he chose to go another way. Free will and all that.

        I’m actually going to check out their other film that I came across too, Small Town Crime.

        https://www.imdb.com/title/tt5751998/

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  4. Like

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