The Impact of Economic Growth and Treasury Bond Drawdowns on Small Businesses

The Impact of Economic Growth and Treasury Bond Drawdowns on Small Businesses

In recent weeks, there have been discussions and observations about the US economy's growth despite high interest rates. These discussions have shed light on the manipulation and obfuscation that often occurs when analyzing economic data. The Bureau of Labor Statistics, for instance, revises its reports every month based on responses from companies and households that come in after its deadline. Surprisingly, the revisions for this year have resulted in a downward revision of 325,000 jobs, casting doubt on the initial reports of economic growth.

This manipulation of economic data is not limited to job reports. The White House has had to revise its jobs report consistently, months after the initial release. These revisions have been substantial, with numbers being revised down from 100,000 to as low as 1,500. While these revisions may not make headlines, they certainly raise questions about the accuracy and reliability of the data initially presented. In fact, the original releases from 2022 indicated over a million new jobs, but after revisions, the actual number was under 100,000 for the year.

Meanwhile, another interesting development has been the drawdown of Treasury bonds. The 20-year Treasury bond ETF (TLT) has experienced its sharpest drawdown ever, dropping from $170 in August 2020 to around $83, a level not seen since May 2006, prior to the Financial Crisis. This represents a drawdown of more than 51% since the highs of August 2020. The main driver behind this drawdown seems to be China, which has been on a selling spree when it comes to Treasury bonds.

So, how do these factors relate to small businesses? The connection may not be immediately apparent, but there are implications that small business owners should be aware of. The revisions in job reports, for example, can significantly impact the perception of economic growth. If the initial reports indicate a strong job market and robust economic conditions, small business owners may be more optimistic about investing and expanding their businesses. However, if these reports are later revised down, it can lead to a decrease in confidence and a more cautious approach to growth.

Similarly, the drawdown of Treasury bonds can have an indirect effect on small businesses. As Treasury bonds are considered safe investments, their yields and prices are closely watched by investors. When there is a significant drawdown in Treasury bonds, it can signal a shift in investor sentiment and a move towards riskier assets. This can impact the availability of credit and loans for small businesses, making it more difficult for them to secure financing for growth or operational needs.

In light of these factors, small business owners should consider taking a few key actions to navigate the potential impact on their businesses. Firstly, it is crucial to stay informed and updated on economic data and reports. While the initial releases may paint a positive picture, it is important to be aware of the potential for revisions and adjust plans accordingly. Secondly, diversifying sources of financing can be beneficial. Relying solely on traditional forms of credit may pose challenges if there is a decrease in availability. Exploring alternative financing options, such as crowdfunding or peer-to-peer lending, can provide additional avenues for funding. Lastly, maintaining a flexible business strategy is essential. Economic conditions can change quickly, and being able to adapt and adjust plans accordingly can help small businesses weather any potential storms.

In conclusion, the manipulation of economic data and the drawdown of Treasury bonds can have implications for small businesses. The revisions in job reports and the decrease in Treasury bond prices can impact confidence, financing options, and overall business strategies. By staying informed, diversifying financing sources, and maintaining flexibility, small business owners can navigate these challenges and continue to thrive in an ever-changing economic landscape.