Unemployment’s Roller Coaster Ride

Not since 1949 during the postwar recession have so many workers dropped out of the labor force as they have in 2020/21 during the Covid pandemic. It’s interesting to look at the numbers alongside other dramatic events in the economic life of the US economy.

The highest unemployment in our history was 25% at the height of the Great Depression (1933). As factories retooled and produced goods in 1941 to support the European war, only 10% of workers were idle. In the ensuing years of our participation in World War II, the massive numbers of American men and women working on the war effort reduced unemployment to between 1-2% for three years, and as low (1944) as 1.2%!

Although inching higher, unemployment numbers generally stayed out of the news until the ’70s when they quietly began to rise. In 1974, after OPEC demanded higher oil prices (the minimum wage was $2.00) unemployment jumped to 7.2%.

The ’80s saw the recession-inspired unemployment rate of 10.8% decline after President Ronald Reagan signed the Garn-St Germain Depository Institutions Act of 1982 (a mouthful for the Act of Congress that deregulated savings and loan associations and allowed banks to offer adjustable-rate mortgage loans). This decade will be remembered for October 1987’s Black Monday when the Dow dropped 508 points, and millions lost their jobs.

During the ’90s with Desert Storm, welfare reform, and NAFTA the U.S. created 23,672,000 jobs, and hourly wages increased 10%. Unemployment rates sandwiched between a low of 4% and high of 7.4% and the economy grew — but so did interest rates. 

The year 2000 saw the NASDAQ reach record highs, but then the World Trade Center was attacked in 2001. The War on Terror raised unemployment and the 2008 minimum wage was raised to $6.55, and a year later to $7.25. The 2010 Republican tax cuts did little to curb unemployment until Trump won the Presidency in 2016 and the economy rebounded.

in 2019 COVID reared its ugly head worldwide. In the US, employers were forced to let workers go as government-enforced emergency rules dictated which businesses could remain open and which must close — rules were imposed at both Federal and State levels to reduce transmission of the worldwide pandemic. Even though the unemployment rate in 2021 hovers around 6%, 2020 will be remembered by most as “the year that wasn’t.”

We Americans are a resilient people. The Congressional Budget Office projects an economic expansion to return to pre-2020 levels and perhaps surpass expectations.
See the CBO Overlook 2021 to 2031.
The Ohio Chamber of Commerce is optimistic, and projects that housing will lead the way.

We are watching the unemployment numbers and other economic news, especially for Cincinnati and surrounds and are well prepared to serve those small businesses bravely leading the charge to prosperity. Call us at (513) 322-1036 or email info@dlmneymatters.com

Small Business Election Effect

Before the election, 81% of small businesses said that the 2020 election would affect their small business — no matter the outcome. According to the report issued by Verizon, small business owners’ concerns ranged from financial viability, social distancing regulations, and the post-COVID business climate. This was a national survey, so it doesn’t necessarily reflect the business climate here in southern Ohio…but as a nation, many of us are interdependent in many ways — whether as suppliers or consumers.

After the election, reality set in that a Biden win coupled with a sympathetic Congress is likely to mean more than COVID concerns. We are looking at the likelihood of the cost of employment rising due to an increased minimum wage from $8.70 per hour ($4.35 for tipped employees) to $15 per hour, plus mandated paid time off (PTO) for employees.

Biden also promised to modify Trump’s Tax Cuts and Jobs Act of 2017, raising the current corporate tax rate of 21% to 28%, and will likely raise the income tax rate for the tax bracket in which most small business owners operate. Plus, we can’t rule out a tax increase on income from capital gains.

Since 2017, CNBC has conducted what they call their “SurveyMonkey Small Business Survey”.  Since the high of 62% in 2017, responses had never dipped below 50 until 2020 (coronavirus). Now that Biden is President, there’s uncertainty among some small business owners, but it’s divided. Republican business owners are more pessimistic than Democratic owners and the earlier confidence from both sides stemming from the assumption that raising taxes on small business would be difficult in a Republican-controlled Senate have been dashed.

At any rate, if there’s one single thing most small business owners have, it is tenacity. Always willing to take risks to achieve their goal, the successful small business owner is so self-motivated and so self-reliant that they can survive anything that comes their way. For those with businesses hit hard by COVID, grants instead of loans would be helpful and for the smaller companies, a Godsend. 

If you have any questions or concerns in these uncertain times, please feel free to call us knowing that our conversations are held in the strictest confidence.

Accountants As Problem Solvers

Small business accounting firms might be described as professional teams that allow business owners to concentrate on their business’s financial success without having to first acquire specific knowledge of accounting terms, processes, and theory. In fact, we’re actually Problem Solvers!

So what can a problem-solving accountant do for your small business?

1. Provide strategic guidance and tools. Your accountant can provide owners more time to focus on the many moving parts of a business. Setting professional, financial, personal, and business goals and staying on track with those goals while running a small business is a challenge. Your accountant will provide advice, be a sounding board, and more importantly build a dashboard of tools to measure progress. If things don’t go as expected, we help you troubleshoot the issues, test solutions, and reset key performance indicators (KPIs).

2. Keep an eagle’s eye on cash flow. Cash flow is the number one problem for most small businesses. Seasonal shifts, politics and big government, taxes, supplier levels, and even pandemics can cause a small business to fail. Even successful ones suffer when payments are slow to come in or expenses are too high. Your accountant’s job is to build long term financial strategies and organize cash reserves and a spending plan to assure that you can always make payroll and cover expenses.

It’s not just about cash flow. Your accountant serves as a sounding board — like what to do with spare cash, pay debt or reinvest? — because they can quickly consider the numbers behind the business and how debt might be structured. 

3. Provide tools to keep you in the loop. Your small business accountant can set up cloud accounting software to automate customer billing, pay invoices, and stay on top of expenses because you can manage your finances from anywhere.

4. Make your life as a business owner less stressful. Budgeting can be a nightmare for busy owners; if ignored, they can lead to poor decisions. Your accountant’s rigorous managing of the budget means you always know the real cost of doing business. And, you’ll know what to pay yourself!

It’s important to hire an accounting service that you can relate to on both a business and a personal level. Should you have an accountant that just seems to go through the motions instead of acting as a partner in your financial success, we hope you will call us. If you are already a loyal partner with us, we’re seriously interested in your feedback — seriously — because it’s our mission to build a thriving and profitable client accounting and advisory service firm. We are committed to incorporating first-in-class processes and procedures and using state-of-the-art technologies to benefit client experiences and, as your partner in success, be there as your ProblemSolver-in-Chief.