Trends
The overall economy continued to recover. Real gross domestic product increased at an annualized rate of 2.8 percent in the second quarter, and although that number was lower than previous quarters, it did mark the eleventh consecutive quarter of positive real output growth since the recession in 2001. Industrial production was also higher. Moreover, consumers and businesses remained confident. For instance, the National Federation of Independent Business's Optimism Index was at or above 103 in April, May, and June, which, according to a recent Advocacy study by Joel Popkin and Company, signifies growing small business output. (For more information on the July 2003 Advocacy study, see: Small Business During the Business Cycle (pdf).)
The unemployment rate remained at 5.6 percent, but that does not tell the full story. Nonfarm payroll jobs grew by 610,000 in the second quarter and 1.45 million since August 2003. Each employment sector, except for government, hired new workers. The number of Americans who have been unemployed for at least 15 weeks continued its decline from 3.3 million in the first quarter to 3.1 million in the second quarter, but remained above pre-recessionary levels.
In the five major industries with more than 50 percent small business employment, there were 180,000 new jobs created between March and June with the following breakdown: leisure and hospitality services, 70,000; construction, 59,000; other services, 28,000; wholesale trade, 15,000; and natural resources and mining, 8,000.
Worker productivity remained strong, showing a 4.6 percent increase in nonfarm business output per hour between the second quarters of 2003 and 2004. Meanwhile, private sector benefit cost increases continued to outstrip the increases of providing wages and salaries over that same time period. Benefits increased 7.4 percent versus a 2.8 percent rise in wages and salaries.
Proprietors' income increased at an annualized rate of 14.8 percent from the first quarter, from $872.1 to $902.8 billion. In addition, self-employment grew slightly. In June, there were 5.3 million incorporated and 10.5 million unincorporated self employed individuals.
Interest rates remained low with the prime rate at 4.0 percent, and small business loans less than $100,000 averaged 4.2 percent. There was an upward trend, though, on 3-month and 10-year Treasury securities, as the market expects higher rates in the near future. The Federal Reserve's Senior Loan Officers' Survey showed greater demand for small firm lending in the second quarter. Meanwhile, venture investment increased to 5.6 billion - almost 17 percent higher than in the second quarter of 2003.
The spot oil price of West Texas intermediate crude ended the quarter at $38.02 per barrel, a $1.26 increase from March. Both figures are higher than the average price per barrel of $31.14 in 2003.
