Despite economic gains, small businesses say, "What recovery?"

Many small-business owners and academics aren’t buying into President Obama’s claim that the 5.2 percent rise in household income last year translates into an economic rebound. Truth be told, it could be the opposite.

Jack Bick called it “an aberration.” Bick, founder of S. Charatan Realty in New York City, said he has seen a slide in apartment and commercial real estate values in the Big Apple.

In Central New Jersey, the story is the same. “We haven’t seen more in salaries in the audits we perform,” said Bill King, co-owner of the Manalapan accounting firm Vinci & King. He handles many business accounts and said their revenue during the last year was basically level with what they made in 2014.

On the other side of the country, David DuPell, owner of an appliance store and shopping complex in Grass Valley, California, said after many years of recession, “sales are now sluggish at best.”

And the owner of an Orange County, California, web-hosting and computer repair business echoed that sentiment. “The small businesses we deal with are not thriving,” he said. “They’re surviving by downsizing locations and automation in the workforce. Cutting costs is more the norm for small business than a rise in income.”

This gloomy view from the trenches was also reflected in a report from the Small Business and Entrepreneurship (SBE) Council, which said Americans now have less disposable income, not more. In fact, its latest analysis showed a “striking shortfall” for the average American’s actual take-home pay.

On Sept. 13, the U.S. Census Bureau reported that median household income jumped $2,800 -- slightly more than 5 percent in 2015. While speaking at a rally in Philadelphia for Democratic presidential candidate Hillary Clinton, President Obama called it a “big deal ... the single biggest one-year increase on record.”

But many Americans see it as a case of “been down so long it looks like up to me.” While household income may have gone up in 2015, “over the last decade there not only has been no growth ... it actually decreased slightly,” said the SBE. This compares unfavorably with the average 1.4 percent annual rise over the last 60 years.

And the 2015 bump still put the level below the pre-recession years of 2006 and 2007, said SBE Chief Economist Raymond Keating.

If real personal income had grown at its historic rate since 2009 -- when Obama took office -- it would actually be $2,000 higher for an individual and $8,000 higher for a family, the SBE said.

Everyone agrees that some good news is better than none. But as Aristotle said, one swallow does not a summer make, and those earning more money in 2015 may be holding onto it until they’re more confident that the economic upturn is real. “The uncertainty about the upcoming election seems to be impacting spending,” said businessman DuPell.

Some sectors of the economy may even be moving backward after years of phenomenal growth. “Land values in Manhattan are down 25 percent, and buildings are empty in Long Island City,” said realtor Bick. “When you see the building cranes disappearing, you’ll know we’re in trouble.”

One reason more people don’t feel wealthier is that the current gain has been “muted by sector-oriented inflation and taxes,” said Craig Lemoine, a professor of financial planning at the American College of Financial Services. “Families are now required to carry health insurance,” he pointed out, “and those premiums have been increasing.”

And then there are those who haven’t benefited at all. The census data shows that 43 million Americans remain in poverty.

“The economic tide may be rising, but it’s still far too low to lift all the boats,” said David Brodwin, a founder of the American Sustainable Business Council. “That’s why most American businesses have yet to see the demand that comes from rising household income.” 

  • Ed Leefeldt

    Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.