Minority Business Enterprise

The new Administration placed high priority on stimulating increased minority group business activity during 1969.

In connection with and in full support of that objective, it was necessary for SBA to review the current status of minority business ownership. The United States, the largest and most diversified business and industrial complex in the world, has no official census or estimate of its business population. SBA was able to develop estimates by business ownership among various racial groups from a sample survey it conducted in 1968 of all U.S. businesses. (See charts 5 and 6.)

These data showed that minorities owned only 3.7 percent of all businesses but comprised some 15 percent of the population. Estimates of industry distribution illustrate that minorities are concentrated in low incomeyielding marginal types of enterprises.

Minorities have relatively high representation in personal services and low representation in the more substantial manufacturing and wholesale trade sectors. The study showed that minorityowned concerns tend to be concentrated in innercity areas.

The degree of improvement experienced in increasing the total number and quality of minority business enterprises in the Nation during 1969 cannot be estimated since no additional sample surveys had been undertaken.

Unless resources are made available for this purpose, either in the form of establishing an official business census or funding special surveys of all U.S. businesses, evaluations of progress toward this national priority will be superficial.

The only official Government data which give some indication as to the minority share of business ownership are the nonfarm managers, officials and proprietors occupational series for white and nonwhites. (Employment and Earnings, published by the Department of Labor.)

In the 11-year period, from 1959 through 1969, the total number of managers, officials and proprietors increased about 18 percent, from 6,785,000 to 7,987,000. Nonwhites in this group represented a very small portion of the total for the entire period but showed steady and significant improvement. Their increase from 154,000 in 1958 to 254,000 in 1969 was a 65 percent gain.

For the same period, nonwhites' share of the total managers, officials, and proprietors increased from 2.3 to 3.2 percent. The very substantial gain of almost 30,000 nonwhites during 1969 was nearly double that of any other year since 1958. This increase suggests that the minority share of all enterprises may also have improved significantly during 1969.

Inflation

Inflation was the overriding problem of the American economy as the 1960's drew to a close, but there were some signs of progress in the fight against it.

The state of the economy at yearend appeared paradoxical, however, since slowing output was accompanied by continued rising prices and high interest rates-a condition similar to that existing during the 1957-58 recession.

Interest Rates

The cost of money skyrocketed to the highest levels in the Nation's history during 1969. (See chart 4.) There are no statistical data to determine the effect of the current credit crunch on small business.

An appreciable drop in the long term rates is not likely in the next year because the demand for long term credit for housing, State, local, municipal, Government, and some corporate financing will exceed the supply.

The slowdown in economic growth had some impact on small business during the closing months of 1969. Consumer spending was strong throughout the first three quarters of the year, but began to edge downward in the last quarter. Most notable was the drop in the purchases of durable goods which affected small retail concerns in the furniture, color television, automobile, and appliance fields.

The decline in general economic activity and tightening of the Federal budget affected the growth of manufacturing concerns.

Most severely affected during 1969 were small home builders, subcontractors, and small suppliers of hardware and building materials.

New Business Incorporations and

Failures

New business incorporations during 1969, as reported by Dun & Bradstreet, Inc., were 274,267up more than 17.4 percent over 1968. (See chart 1.) However, appreciable declines were registered in November, as contrasted with previous months.

The number of business failures during the first quarter of 1969 (see charts 2 and 3) ran 15 percent lower than the 1968 first quarter. As the year ended, there was a sharp reversal with failures in the fourth quarter running 15 percent over the same period a year earlier.

Despite this, the annual total of 9,154 failures was the smallest for any year since 1953.

More significantly, the dollar liability among failing firms was 21 percent higher for 1969 than for 1968 and averaged $125,000, or $19,000 above the previous peak set during the credit crunch of 1966.

Industry groups suffering the most were furniture stores, auto dealers, jewelers, and florists. More service enterprises failed during 1969 than during 1968, particularly those firms in business services.

Manufacturing and wholesaling enterprises fared about the same in 1969 as in 1968, but the construction industry, which is especially sensitive to changes in the economy, suffered high casualties in the last two quarters of 1969.

Outlook-1970

The Administration has as its major policy objectives for 1970 the reduction in the rise of prices and the revival of real output.

The expectation is for the right combination of fiscal and monetary actions taken in the first half of 1970 to lead to a significantly declining rate of inflation and resumption of real output rise by the second half of 1970.