Video: Obama proposes small business boost

  1. Closed captioning of: Obama proposes small business boost

    >>> the president.

    >> that these have been a rough couple of years for our economy and for our country. the deepest downturn since the great depression ripped through our economy. costing more than 8 million jobs and rocking businesses, large and small. and that's why we took some very tough steps. in some cases, unpopular steps when i took office to break the back of this recession. and today, we received additional news suggesting that we are climbing out of the huge hole that we found ourselves in. last january, the month i took office, almost 800,000 americans lost their jobs. today, we learned that job losses for this january were 20,000. the unemployment rate dropped below 10% for the first time since the summer. manufacturing employment grew last month for the first time in three years, led by increased activity and the production of cars and trucks and auto parts . these numbers, while positive, are a cause for hope but not celebration because far too many of our neighbors and friends and family are still out of work. we can't be satisfied when another 20,000 have joined the ranks and millions of more americans are underemployed, picking up what work they can. it is encouraging, the job loss in january was a small fraction of what it was a year ago and that the unemployment rate last month went down and not up. understanding that these numbers will continue to fluctuate for months to come, these are welcome if modest signs of progress along the road to recovery. now, even as we take additional steps to hasten that recovery, we know that there are limits to what government can do to create jobs. the true engine of job creation will always be businesses. what government can do is fuel that engine by giving entrepreneurs and companies the support to open their doors and to expand and to hire more workers. that's exactly what this administration intends to do and what we've been doing, working with the sba and karen mills. we're starting with small businesses because that's where most of the new jobs do. over the past 15 years, small businesses have created roughly 65% of new jobs in america . these are companies formed around kitchen tables at family meetings, formed when an entrepreneur takes a chance on a dream, formed when a worker decides it's time she became her own boss and it's worth remembering once in a while a small business becomes a big business and then changes the world. that's why last week i proposed a new small business tax credit , $5,000 for every any employee you hire this year. couple of these folks here, small business owners i talked to, said they would be interested in using that tax credit . this week, i proposed a new small business lending fund that would take $30 billion of the fund originally used to rescue big banks on wall street and use it to provide lending capital, community banks on main street . i know we've got capital one bank here that's been a lender to oasis, capital bank, excuse me. and we appreciate the good work that you've done, supporting this company. under karen mills, sba has decreased loan fees, increased lending by 86%. we've called for legislation to increase sba loan limits to allow us to guarantee loans of up to 5 million, compared with 2 million now. and today, i'm taking yet another step to assist small business owners. get the capital that they need to grow and to hire. i'm proposing legislation that allows firms to refinance their commercial real estate loans, their mortgages, under the sba. right now, even companies with great credit histories are facing challenges, refinancing and what are historically low ra rates. property values have fallen and lending has dropped. as a result, many businesses that otherwise would have survived this downturn are at risk of defaulting which, in turn, will lead to even lower property values and less lending, not to mention lost jobs. in addition, i'm also proposing that we increase the limits for sba loans used for lines of credit and working capital . something that i know could benefit business and countless others. the truth is the economy can be growing like gangbusters for years on end and it's still not easy to run a small business . it's not easy to stay ahead of your competitors. it's not easy to keep your costs down, to do right by your employees, to constantly innovate, adapt in a changing world. talking to ruth, she reminds me it's not easy keeping up with health care costs and so she is very anxious to see health care reform passed so small businesses can pick up the cost for their employees. and in this deep and lasting recession, a hard job has been that much harder because for much of the last year, people weren't buying and customers weren't calling and banks were not lending. but even in the face of these obstacles, even in these tough times, all across the country, there are people like rick and dennis and ruth and will who haven't given up. you guys wake up every day and seek a way to safely navigate these troubled waters , to fulfill your obligations to your fami families and to your employees and your customers. and in that determination, that resolve, you embody what's best in america and you keep making america stronger. next week, congress will start debating many of the jobs proposals i've outlined today and in recent days, many proposals to benefit small business , many of the proposals to spur hiring. if there are additional ideas from either party, i'm happy to consider them as well. but what i hope, what a strongly urge, is that we work quickly and we work together to get this done. america 's small businesses are counting on us. thank you very much, everybody. and

By John W. Schoen Senior producer
updated 2/5/2010 3:39:38 PM ET 2010-02-05T20:39:38

The government’s report on the job market in January offered fresh hope that the economy is at last pulling out of its worst downturn since the Great Depression.

For the estimated 8.4 million people who lost their jobs to the recession, however, the data offered little cause for celebration.

Friday’s report left many economists, investors, employers and job seekers scratching their heads. The Bureau of Labor Statistics found in its survey of large employers that some 20,000 jobs were lost overall in January. But the separate survey of households showed a gain of more than a half-million jobs, which pushed the jobless rate down sharply to 9.7 percent from 10 percent.

The report also included a number of adjustments, including a revision of last year’s data that showed the economy shed 1.4 million more jobs last year than originally reported.

The speed with which companies shed jobs last year dramatically outpaced the last three recessions. Two years after the recession began in December 2007, U.S. payrolls shrank by 6 percent — double the contraction seen in the 1981-82 recession. Some forecasters think last year’s historic spree of layoffs means the economy is poised for a surge in job growth as the recovery takes hold this year.

“What we saw during the recession was that firms were much more aggressive, much quicker to shed workers, and that's why productivity was so good during the recession,” said former Federal Reserve Gov. Laurence Meyer. “In our view, that's going to reverse now, and firms are going to increase employment more than you would otherwise expect from the growth in output.”

There were some early signs of that in the January data, including a nice pick-up in temporary jobs and a drop in the number of people who told the BLS they were working part-time but wanted a full-time paycheck.

“I think if we just have a little patience here within the next three to six months we're going to be seeing substantial job gains," said Michael Darda, chief economist at MKM Partners.

But most of the 8.4 million workers sidelined by the recession will likely need to wait more than six months to get back to work. The economy needs to create 100,000 to 125,000 jobs a month just to keep up with the growth of the population.

“I don't think we're close yet to even a stable rate at this point,” said Mark Zandi, chief economist at Moody’s “We have yet to see any hiring. Until we get real, positive, substantive job growth, it's hard to conclude this is a self-sustaining economy."

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Even if job growth returns to the pace of the boom years in the middle of the last decade, it would take years to create the millions of new jobs needed to bring employment back to pre-recession levels.

“Getting those jobs back is going to be very difficult,” said William Gross, a founder of investment manager PIMCO. He pointed out that a third of the jobs lost were in fields related to the housing boom, including construction workers and real estate agents. "Those jobs aren't coming back.”

It also remains to be seen whether the economy will continue moving forward even after massive government stimulus spending begins to fade later this year. The hope is that the surge in public spending will the keep the wheels of the economy turning, including business investment, consumer spending and export manufacturing.

So far, the plan seems to be working. The economy surged ahead at a strong annual rate of 5.7 percent in the fourth quarter of last year, as measured by gross domestic product. But the growth pop was largely based on the large checks written by the U.S. Treasury and other governments around the world, according to Gross.

“The minute that that check disappears, the private market is standing very lonesome and on its own legs,” he said. “The government is withdrawing because citizens and politicians are basically saying, enough is enough.”

Concerns about the swollen federal budget deficit and rising national debt may also curb enthusiasm on Capitol Hill for White House proposals to boost jobs. The latest package would include yet another extension of unemployment benefits to cope with the large pool of workers who have been out of a job for more than 27 weeks. That number rose to 6.3 million in January, up from 1.3 million when the recession began.

The impact of federal spending has been blunted by several factors weighing on economic growth. Though credit has begun to ease somewhat, lenders and investors are still extremely skittish about lending after losing hundreds of trillions of dollars in bad bets on faulty home mortgages, bad private equity deals and overpriced commercial real estate.

Business investment has begun to perk up, but companies are waiting for more convincing signs of recovery before they commit precious cash to buying new equipment and expanding operations. While federal spending has expanded dramatically, state and local governments are still cutting back as the recession, and falling home prices, have cut deeply into tax revenues.

Households are still working off high levels of debt; a third of homeowners with mortgages owe more than their home is worth. That drag on consumer spending has dampened the effects of government spending. And the high rate of foreclosures, expected to increase again this year, continues to put pressure on the housing market. Aside from the depressed levels of new home construction, the weak housing market dampens demand for all of the goods and services that comes with the purchase of a new house.

Once those forces are reversed, the economy will likely begin generating new jobs to meet renewed demand. But even after the monthly job numbers turn positive, it will likely feel like a recession until those 8.4 million workers are again collecting a paycheck.

“With the unemployment rate likely to be elevated for such a long time, the kind of angst out there and dissatisfaction and discomfort is going to last for a very long time,” said Meyer.

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