November 25, 2009
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Proprietors' income (income earned by owner-operated sole-proprietorships or partnerships) fell off a cliff last year. Thankfully, it has finally started to recover.
These moves makes sense since proprietors' income is a coincidental indicator (it moves with the economy). Specifically:
- Q407 GDP declined a modest 0.2%, reflected in the slight inflection downward in the above chart.
- Q108 GDP actually increased 1% (driven by higher exports and a weaker dollar), which is also reflected in the chart.
Following the minor growth in Q108, proprietors' income has dropped significantly in line with GDP declines until Q309, when it rose 4.1%. It is still down 6.8% from its peak one year earlier.
We expect small business to continue to recover as the economy does. Which is to say... if this is a "v-shaped recovery," as some forecasters predict, we'll be golden. If it isn't, small business owners will remain in the poorhouse.
Additional reporting by Rory Maher.
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