The Small Business Administration’s most popular small-business loan is down 19 percent nationally in volume from the same time a year ago, based on agency data.
According to the St. Louis Post-Dispatch "The reason for the dip is twofold: Some banks are making fewer loans, and fewer entrepreneurs are seeking them."
Often, small business owners will use their homes as collateral for borrowing money for their operations. With many homes worth less than their mortgages, the practice is disappearing.
The news points to another set of circumstances undermining the growth of smaller companies, which employ a large part of the US work force. The federal government has done little to address this, which may lead to falling employment as lay-offs outside very large companies rise.
So far, this recession has not been marked by high unemployment the way that the 1973 and 1982 downturns were. In those periods, the unemployment rate hit almost 10%, which would be double the current level.
Large companies in the auto, airline, and financial sectors are cutting staff, but the tech and consumer products portions of the economy are still doing well.
If small business employment growth falters, the national unemployment figure could move up two or three points.
Douglas A. McIntyre
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