Number One Threat to Long-Term Economic Growth - Explained by Capstone

This is the Number One Threat to Long-Term Economic Growth

12:10 07 August in Blog

Amid positive job reports and a surging stock market, one factor still presents a major obstacle to long-term economic growth in the US: a persistent slackening of productivity. We are currently in the midsts of the longest downward slide in worker productivity since the 1970’s, an unfortunate asterisk that should accompany the latest round of job reports. It’s also likely to keep the Fed from raising interest rates any time in the near future.

Productivity by the Numbers

Productivity — the measure of what goods and services a worker produces each hour on the job — fell 0.5% at a seasonally adjusted rate during the second quarter, according to the Labor Department. That marks the third consecutive quarterly drop in productivity, the longest streak since 1979. What’s worse, the trend shows few signs of abating; productivity growth rang in at just 1.7% from 2007 to 2015, half that of 2000 through 2007.

Why Worker Productivity Matters

For business owners, the importance of worker productivity can’t be understated. The equation is simple: less productivity means more expenses and less profit. On a macro level, productivity is a key gauge in measuring wage growth, prices, and overall economic output — which have all been falling as well.

What’s Killing Productivity?

According to numerous studies, lagging productivity has several culprits. Among the most important are businesses unwillingness to invest in new equipment, machinery, and equipment — the raw materials that translate directly into job growth, wage growth, and gains in worker efficiency and productivity. While the exact cause of lagging productivity is difficult to nail down, it’s worth noting that fixed nonresidential investment, the meat and potatoes of business spending, has also dropped the last three quarters along with productivity.

That lack of investment has lead to a decline in new orders for nondefense capital goods on a year-over-year basis for much of the last year and a half.

What’s the Solution?

As we mentioned in our most recent blog, the majority of US manufacturers are small businesses — and many find themselves sorely lacking the working capital needed to invest in their businesses, jump-start productivity, create backlogs, and grow. As a low-risk remedy, manufacturers and other small businesses with strong demand for their products use invoice factoring to boost their cash flow. That’s where Capstone can help!

Grow Your Business with Capstone

For qualified clients, Capstone provides purchase order factoring, single invoice and full-contract factoring for work performed under contract with credit-worthy accounts. We have highly experienced professionals on staff to facilitate the purchase of work in progress and progress billing-related accounts receivable. Please visit our homepage or contact us directly for more information.

Lawmakers Continue to Turn Up The Heat On Big Banks

20:49 16 October in Blog
In a recent hearing before the Senate Banking Committee, lawmakers continue to call for increased regulatory reform from regulators in an effort to reduce the risk big banks pose to the U.S. financial system. 
 
A distinction was made between large banks and other financial institutions. Several senators encouraged regulators to lessen the burden, or possibly exempt, certain insurance companies and small to midsized banks from aspects of Dodd-Frank.
 
Sen. Bob Corker (R., Tenn.), for instance, called on regulators to take whatever steps necessary to make certain these banking institutions are not too complex so as not to be resolved through bankruptcy. 
 
Other senators praised the Federal Government for promising to raise the capital requirements on the largest U.S. banks.  According to Sen. Sherrod Brown (D., Ohio), there is a great deal of support in both the house and senate to implement stronger capital standards.  Such standards could require big banks to retain additional earnings in order to build capital they would use to fund lending rather than allocating such earnings to their shareholders. 
 
Banking executives believe that capital rules for the largest U.S. banks are already too high.
The senators’ frustration regarding Wall Street banks were further expressed in the hearing by Sen. Elizabeth Warren (D., Mass.). She inquired as to why individual bankers were not being held accountable for their nefarious actions which lead to the financial crisis.  Ms. Warren’s concern is that lack of criminal prosecution may send the message that you can break the law, get away with it, and receive a bigger paycheck. 
 
With lawmakers continuing their efforts to put pressure on regulators to come down hard on banks, the ones that ultimately suffer are those looking to banks for capital.  Individuals and small business owners who rely on bank financing may find it more difficult to obtain the loan they so desperately need in order to make payroll or expand their business.  
 
As lawmakers continue to apply pressure on regulators to impose more stringent requirements on the banking industry, it is clear small business and working capital loans will become ever more difficult to acquire. Capstone Capital Group, LLC understands the concerns of commercial borrowers who are considering bank financing.  Accordingly, we offer various business finance options, including “Single Invoice Factoring” which functions as a safer alternative to traditional, and often times unpredictable, bank financing. 
 
Our underwriting guidelines are simple, straightforward and not subject to stringent regulatory oversight and control.Capstone Capital Group, LLC specializes in Purchase Order factoring, Single Invoice Factoring (“Spot Factoring”) for firms in need of immediate cash. Spot Factoring provides flexible, no contract invoice selling in exchange for working capital from Capstone Capital Group.  Give us a call today to find out how we can help you.

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