Q3 Kauffman Economic Outlook: Uncertain

Q3 Kauffman Economic OutlookThe Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers for the third quarter of 2010 has recently been released. Compared to the responses in the second-quarter 2010 Outlook–which was not all that rosy-the viewpoint this time around has become far more pessimistic.

Sixty-eight percent of economics bloggers who responded to the Q3 survey (conducted in mid-July) described the U.S. economy’s overall condition as “mixed.” None described it as “strong and growing.” The rest were split three to one toward an assessment of “weak.”

When asked for open-ended responses to describe the state of the economy, the most common word bloggers used was “uncertainty,” followed by “weak.” And in response to one survey question, the respondents rated the probability of a double-dip recession at 44 percent.

“Uncertainty is casting a shadow over the economy as well as the debate about the economy,” said Tim Kane, senior fellow at the Kauffman Foundation and author of the study.

The U.S. government came in for a fair share of criticism. Just 5 percent of respondents believe the economy is “better than official government statistics show” (down from 14 percent in the Q2 survey); 47 percent think it is worse. Although bloggers responding to the survey mostly identified themselves as nonpartisan, 70 percent believe the federal government is too involved in economic matters.

The U.S. Congress also received the poorest ratings of any organization or institution in the survey. Nearly 80 percent graded it either “D” or “F,” for an overall grade point average of 0.8. (Wall Street garnered a 1.4 average.)

While overall business conditions were rated “fair” by most respondents, the majority (57 percent) say that conditions for small business are “bad” or “very bad.” That number was slightly up from last quarter’s. Bank lending to businesses was also rated “bad” or “very bad” by some 35 percent of respondents.

Conditions for entrepreneurs (which the survey defines as startup businesses) were somewhat better than for small business. Slightly more than 50 percent described these as “fair” (down from 60 percent in the last survey); about 30 percent deemed them “bad” or “very bad” (up from about 20 percent in the last survey).

I am very surprised by this pessimism. The feedback I hear from business owners and entrepreneurs is that conditions are getting better, although not strongly better. Even in my own business, things have picked up noticeably since the start of the summer, with more interest from clients and more new business. I wonder how much of the pessimism is related to the unrelenting negative coverage in the media coloring our perceptions?

Do these figures surprise you, or do they jibe with your outlook? How are things looking in your business? Please weigh in with a comment below.

Editor’s Note: This article was previously published at OPENForum.com under the title: “Are Things Really as Pessimistic as the Q3 Kauffman Economic Outlook?” It is republished here with permission.


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

7 Reactions
  1. I write a daily blog which is an analysis of the S&P 500 Index chart. My take on the economy is can be summed up as, “Indecision.”

    According to how I interpret the art, science, and voodoo of Technical Analysis, the charts are hovering in an area just below Technical Bull Market. Price has tested the waters several times to rise above this “line-in-the-sand” but continues to fall back each time. Yet, Price refuses to panic and drop very far below.

    Basically, I see Investment money running around in circles, not quite sure what to do.

    With a US debt between 13-14 Trillion dollars, I don’t logically see how anyone can assume things will get better anytime soon, but thus far the charts indicate that there is a great deal of Hope out there still.

    Tomorrow is another day, of course, and things can change very quickly. While the Markets are searching for reasons to Hope, it’s also very skittish, and I believe can be easily spooked into Fear.


  2. Anita,

    I agree with the findings, 100%.

    I really don’t think that the media coverage has anything to do with the data.

    There are some niche businesses that are doing really well. (I think that there are always a few during recessions, anyway)

    The reality is that our economy is not in good shape, at all. There’s just too much uncertainty.

    Many folks (that have above average incomes) have lost their homes. People I know have lost their homes, because of this long, and nasty recession. I can’t imagine what that must feel like, especially with children involved.

    The leadership in Washington better get it together, and fast.

    Interestingly enough, my eNewsletter this week discusses our lousy economy, and that the feelings of lots of people, are based in reality.


    The Franchise King

  3. Anita, I see many small businesses in our firm, which virtually incubates and mentors entrepreneurs (how I met Flowtown) and businesses that want to grow. I see a lot of fear mixed with the usual passion and dedication of entrepreneurs. That being said, startups are being funded right and left in the Bay Area by SuperAngels, and in Arizona four municipalities have stepped up to underwrite our services. So at least the world is noticing the importance of entrepreneurship.

    As for the economic data, I find it is usually a quarter or two behind what we feel in the market. Things are by no means good, but people are finding ways to soldier on:-)

  4. Anita, I’m with you. The media colors our perceptions and attitudes. Kill your television, I’m not being facetious, for a week or two or for good and you’ll feel much better about the economy.. Of course, you know I don’t have one and I’ve not missed anything in the years I’ve not had one. The important news gets to me and I soldier on as Francine says without the overtones of overlords who don’t know much more than I do… I’m not suggesting sticking one’s head in the sand, but I do think, as a small biz owner that I do much better when I focus on my customers and my work and doing the best I can.

    Being the trends watcher and mentor that you are, I know you can’t turn off the news and serve your readers, but the economy is going to do what its going to do and if we can just keep innovating, encouraging other entrepreneurs, and future ones, we’ll be okay.

  5. Kauffman’s studies are usually pretty accurate, so you’re “right on”. The uncertainty of economic conditions in the future is keeping small business from hiring, and expanding. Until we know what the future holds in regulations, taxes, and the political landscape, entrepreurs will remain conservative.

  6. Mark J. Denning, CPA

    As a CPA and small business financial consultant, I see the same issues every day, uncertainty and pessimistic outlooks. Interestingly though, when I teach small business CEOs how to financially manage their businesses with real-time cashflow management tools, they realistically see how they need to financially perform in the areas of sales, delivery, cost control, overhead management, etc. With that view of the their world, they are able to achieve profitability and positive cashflow because it is what they believe will happen. It becomes their perception and not the world’s perception of where their business is going.