kiplinger connection
The Economy • Small Business • Energy

The Economy: Improvement is ever-so gradual.
Small Business: SBA 7(a) loans are coming back.
Energy: Oil woes will bolster alternative-energy investment.

The Economy
The Federal Reserve won’t waver from its steady-rate policy, despite the anemic 1.3% pace of first-quarter economic growth and the weaker-than-expected increase of only 88,000 jobs during April. Business activity is already on the mend, with factory orders rising and companies’ expectations of future orders looking more robust as well. These point to moderate boosts in both jobs and growth in coming months.
The inflation picture is improving, but ever so gradually. The April employment report shows that growth in average hourly earnings is finally easing, which should cool Fed fears about wage-led inflation. But the Fed still needs several months to judge how cumulative wage gains will eventually feed through into prices that firms charge to consumers. The central bank won't be able to make that call until later this year.

A sign of a healthier economy on the way: Temp hiring is stirring after a drop of 19,000 temporary jobs between January and the end of April. Firms tend to take on more short-term help when they expect their sales to pick up soon but aren’t quite ready to commit to full-timers.
The outlook for temp employment will vary widely by industry. Temporary workers in steadiest demand will be physical therapists and other health workers as well as paralegals and software coders. But employment of office workers and electronics assemblers will lag.

Note the big demand for short-term lodging for relocated workers. The average stay in these units is 68 days, up from 48 days a year ago. Blame the slumping housing market, which means employees need more time to sell a home in their old location before buying one in a new area.
Relocation consultants can expect more business as employers seek help in balancing their workers’ needs and company costs.

Gambling industries are poised for another solid year, with total earnings rising about 7% after last year’s 8.5% advance.
The weaker dollar is a plus as foreigners, especially Europeans, bring fat wallets to Las Vegas, Atlantic City, and other destinations.
But competition abroad is heating up. China is building up Macau into a Vegas-type destination that’s expected to post double-digit annual gains in revenue. New casinos are on the drawing board in the Philippines. Singapore and South Korea will also vie for globe-trotting high rollers. And South Africa and Israel are getting in on the act, eyeing Europeans.

Small Business
Congress will restore funding to the SBA 7(a) loan program in FY 2008, three years after axing the government’s contribution. Bush frowns on the move, calling it a taxpayer subsidy, but won’t veto it because it’ll be included as part of a broader bill that provides loans to military veterans and women running small businesses. SBA 7(a) loans allow smalls to borrow up to $2 million and pay it back over 25 years.

Energy
America’s dependence on foreign oil faces a much shakier future.
Exports from a couple of top, nearby suppliers continue to wane.
Production woes in Mexico and Venezuela are mounting. In both countries, strong resistance to foreign investment in their oil and gas industries hinders needed upgrades to energy facilities.

The U.S. will hunt far and wide for others to fill the import gap. Canada should be able to make up some of the shortfall as production
of oil from Canadian oil sands starts to expand. But nations more prone to political problems ... Algeria, Angola, Azerbaijan, Chad, Ecuador, Kazakhstan, and others ... will also rise quickly in the rankings of crude suppliers to the U.S. None supplies more than 5% of U.S. needs now.

A wider array of sources adds to supply risks ... the possibility of shipment cutoffs or delays from a given country.
But a riskier oil market is also a plus for alternative energy, helping to boost investment and R&D in biofuel, fuel cells, and more.