Meredith Whitney wrote a simple, elegant editorial yesterday in the Wall Street Journal entitled The Small Business Credit Crunch.
In it, she drew a fairly short, straight line from the current Senate financial sector regulation bill to higher-cost or even unavailable consumer credit for use by small businesses. Added to that, Whitney noted how lower housing values have wiped out their use as a traditional small business financing source.
Thus, in her opinion, small business-based job creation, a traditional source of US economic expansion, will be crippled, as the small businesses face financing difficulties, as and should they desire to expand or be created.
To this already dark picture, Whitney added her prior views on municipal and state government budget shortfalls and, eventually, job cuts.
Whitney and former Merrill economist David Rosenberg each shared these views last winter on CNBC, from which I wrote the two linked posts.
Now, it seems that at least Whitney sees evidence of her predictions coming true and having meaningful consequences.
The punchline of her article is that the government job cuts will result in up to two million newly-unemployed at a time when Congressional legislative action will help dampen small business formation and/or growth.
Whitney believes it unlikely that large US businesses will turn around and hire nearly the same number of workers- three million- they just got finished laying off in the past three years.
Missing from the picture will be small businesses growing to take up the five million jobs they have cut in the recent recession.
Putting the pieces of the picture together, Whitney sees continuing jobless 'recovery,' with large businesses continuing to enjoy jobless productivity gains, small businesses crippled by consumer credit contraction, while municipal and state governments finally shed workers larded on in earlier expansions.
Hardly cause for optimism for a robust, high-employment recovery, is it?
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