A lot of observers have commented on the widening disconnect in the U.S. economy. Wall Street up, Main Street down. Stocks up, employment down. Exec bonuses up, wages down. You get the picture. Where does small business fit? Somewhere in the middle, according to a recent survey by American Express. “We see two clear stories being told by business owners,” says survey chief Susan Sobbott. “Many small businesses are seeing signs of improvement, yet other firms are still struggling to keep their enterprise afloat.”
Tough time to be an elf. The same AmEx survey reports that small business owners plan to give presents to their customers at holiday time but will trim the treats for employees. Half of survey respondents said they’d hand out thank-you gifts to customers (about the same number as last year) but only a third said employees would be receiving goodies (down from half last year) and even fewer said workers could expect a year-end bonus.
Want a gift? Go to Wall Street. While small businesses continue to cut back, times are good among the financial giants. Goldman Sachs, Morgan Stanley, and JPMorgan Chase will splash out $30 billion in bonus cash to executives and employees this year. The average bonus will be $250,000, which comes to five times the annual income of the U.S. median household (i.e. those people whose tax dollars saved the bacon of Goldman Sachs, Morgan Stanley, and JPMorgan Chase).
Banks to customers: not so generous. At the same time they’re throwing around the bonuses in the boardroom, banks are pretty stingy when it comes to businesses looking for a loan. Lending is down across the board, Bloomberg says, with banks including Citi, Bank of America, and JPMorgan Chase all giving the cold shoulder to borrowers. So what are they doing with the hundreds of billions in bailout money they got? Sitting on it. This was not the intention of TARP but, hey, it works for banks (see above) and everyone else just has to lump it. There are a few hopeful signs. The Federal Reserve reported that fewer banks are tightening lending standards (which is a little like saying, “Hey, it’s raining less hard”) but the long-term outlook isn’t merry and bright. The credit crunch is still a “serious problem,” assesses economist Jan Hatzius. “This could keep growth significantly weaker than the consensus view in 2010.”