Velazquez on State of the Small Business Economy

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Rep. Nydia Velazquez (D-NY), Ranking Member of the House Small Business Committee

Feb 16, 2011, 05:49 ET

WASHINGTON, Feb. 16, 2011 /PRNewswire-USNewswire/ -- Rep. Nydia M. Velazquez (D-NY), Ranking Member of the House Committee on Small Business, delivered the following statement today at a hearing titled "Putting Americans Back to Work: the State of the Small Business Economy":

"Since the financial crisis, this Committee has been closely following the health of the small business sector. This has included holding hearings here and throughout the country, as well as addressing the problems we found through legislation. Now, the economy has begun to grow again and a recovery is underway. However, it is clear that there is a long way to go and entrepreneurs are still struggling on many fronts. This hearing will help us understand how much the small business economy has changed and what, if anything, we should do here in Congress to address it.

"This recovery started in mid-2009 and, according to the Federal Reserve, appears to now be strengthening. GDP has grown for six consecutives quarters and exceeds the 2007 end-of-year peak. Today, the U.S. economy is larger than ever and consumer spending was growing at an annual rate of 4.4 percent for the last quarter of 2010.

"As a result, many small businesses are more optimistic than they have been in a long time. This new-found confidence is seen in the most recent NFIB Optimism Index, which is at its highest point since December 2007. Surveys by NSBA and Gallup also showed that small business confidence was increasing.

"Small firms are also finding easier credit conditions – as confirmed by both the Federal Reserve and the Thompson Reuters/PayNet Small Business Lending Index, which we'll hear more about today. This is a very positive development since small businesses have been all but locked out of capital markets for a long time.

"This positive news is tempered by the challenges we see in the labor market. With losses of more than 8 million jobs in 2008 and 2009, the four consecutive months of positive job creation we have seen are simply not enough. The unemployment rate has declined significantly, but we are still not seeing the level of employment gains we need to achieve a full recovery. According to research, small firms have shed jobs at a more rapid pace than larger firms. In addition, they have chosen not to add employees even though they needed to, citing the uncertainty they face about sales revenue and cash flows as the top reasons for not doing so.

"This issue – job creation – is the most important facing Congress today and small businesses are instrumental to the solution. Responsible for generating 64 percent of net new jobs over the last 15 years, small firms have typically driven employment gains after recessionary periods. We saw this in the early 1990s and again in 2001.

"It is important that while we seek to encourage entrepreneurship of all types, we focus on businesses that tend to dramatically increase job creation. These are high-growth firms, typically undertaken out of a market opportunity, rather than out of necessity. Such firms need plentiful capital, the ability to access a highly-skilled workforce, and a business environment conducive to risk-taking. They can grow in size rapidly and in doing so can add tens or even hundreds of employees in the course of months.

"With that said, small businesses of all sizes and stripes remain absolutely critical to our economic health. During today's proceedings, I am looking forward to hearing both anecdotal accounts as well as empirical evidence about the state of the economy and its impact on small firms. By doing so, this Committee can identify the bright spots, as well as where entrepreneurs are facing the greatest challenges. As a result, we will be better informed as we try to tailor policy solutions regarding these problems. In advance of the testimony, I also want to thank all the witnesses who traveled here today for both their participation and insight into this important topic."

SOURCE Rep. Nydia Velazquez (D-NY), Ranking Member of the House Small Business Committee