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Slowing, but no slump
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November 15, 2000: 7:24 a.m. ET
Main Street curbs hiring, spending, but economy 'fundmentally in good shape'
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NEW YORK (CNNfn) - The highly publicized woes of the Internet sector aren't yet pulling down the general economy, even the companies that serve high tech. Just ask John Heaton.
"We've seen some of our dot.com clients go down in flames," said Heaton, whose Kennewick, Wash., company, Pay Plus Benefits Inc., provides employee services to businesses in 24 states. "But there have been just as many new ones to take their place."
As a "professional employer organization," Pay Plus Benefits offers "employee leasing" services to companies, handling the administration of payroll and other staff services primarily for fast-growing technology firms.
"We are a microcosm of small business because all of our clients are small businesses," Heaton said. "We see economic greatness."
That seems to be the sentiment nationwide, according to the latest survey by the National Federation of Independent Business. Although the economy is showing more signs of slowing, with hiring plans and capital spending down, the monthly survey finds the economy is "in fundamentally good shape."
Job market remains tight
The job market remained tight in October, the NFIB reported Wednesday, with 32 percent of employers reporting staff vacancies that were hard to fill. But hiring plans took a tumble, with only 14 percent planning to add to their payrolls, net of those planning job cuts, the organization said.
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You have $150,000 software engineers in Seattle changing companies because they don't like the coffee.
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John Heaton
Pay Plus Benefits Inc. |
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"This year will deliver the tightest labor market in survey history," said William C. Dunkelberg, the NFIB's chief economist, who has been surveying federation members monthly since 1973.
But the availability of qualified labor dropped out of the No. 1 position among employers' concerns, to rank second with 22 percent of the vote. High taxes took the top spot, named by 26 percent.
Firms also curbed their spending plans in October, with 33 percent planning outlays over the next six months (compared to 34 percent year-to-date). At the same time, two-thirds reported actual capital spending in the past six months, slightly more than in September.
Small firms' optimism slips
Overall, the federation's "index of small business optimism" lost 1.7 points in October, falling to 99.4.
And the number of firms expecting the economy to improve over the next three months declined by 2 points, to register -3 percent. This indicator has been in negative territory for most of the year, reflecting both a very strong year in 1999 and efforts by the Federal Reserve to slow the economy by raising interest rates.
The Federal Open Market Committee was to meet again on Wednesday to consider monetary policy, but "credit markets remain very friendly," Dunkelberg said. "Risk spreads seem to be rising," meaning that chancier loans carry higher interest rates, but few firms are being turned down on their financing requests to banks.
Back in Kennewick, Wash., Heaton said his biggest frustration was the uneven distribution of technology infrastructure, making it difficult for his firm to offer its services to all the communities it would like to reach.
Pay Plus Benefits has doubled its revenue in the past two years, to an estimated $28 million this year, without adding to its 15-member staff, by taking advantage of the Internet to provide services to its employer-clients and their workers.
Heaton also is concerned about retaining staff. His 10-year-old firm subsidizes day care for its employees, and the market is tight for skilled technical workers, he said: "You have $150,000 software engineers in Seattle changing companies because they don't like the coffee." 
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