Small business owners across the U.S. are growing increasingly pessimistic about the speed and stamina of the economic recovery, a report by the National Federation of Independent Businesses (NFIB) finds.
A report by the National Federation of Independent Businesses (NFIB) found
the small-business sector is not on a positive trajectory and noted the Small
Business Optimism index fell 3.2 points in June after posting modest gains for
A survey of small businesses nationwide found over the next three months, 8
percent plan to reduce employment (up one point), and 10 percent plan to create
new jobs (down four points), yielding a seasonally adjusted net 1 percent of
owners planning to create new jobs, unchanged from the May reading and positive
for the second time in 20 months.
Since the third quarter of 2009, job creation plans have underperformed the
recoveries from the other two deep recessions covered by the NFIB survey. "With
this half of the private sector missing in action, the poor growth performance
is no surprise," the report noted. Reports of positive profit trends worsened
by three points in June, registering a net negative 32 percentage points (28
points worse than the best expansion reading reached in 2005).
For those reporting lower earnings compared with the previous three months,
55 percent cited weaker sales, 2 percent blamed rising labor costs, 6 percent
higher materials costs, 2 percent higher insurance costs and 9 percent blamed
lower selling prices. Two percent blamed taxes and regulatory costs. "The
persistence of this imbalance is bad news for the small business community,"
wrote the report's authors, William Dunkelberg and Holly Wade. "Profits are
important for the support of capital spending and expansion."
The report blamed "hurricane force headwinds" blocking a sustained and
stable economic recovery, emanating from a gridlocked government and an
unrealistic view of what small businesses need. "Either policymakers have no
idea how to help the economy or they are intentionally committing it to
unsustainable expenditure growth and deficits so large that there will be no
alternative but to raise taxes, a slow suicide for a dynamic economy," the
report stated. "While political leaders trumpet their ideological attempts to
remake the economy and save small business, more and more ordinary folks are
wondering what in the world are they are thinking."
The report found the frequency of reported capital outlays over the past six
months was unchanged at 46 percent of all firms, two points above the 35-year
record low reached most recently in December 2009. The percent of owners
planning to make capital expenditures over the next few months fell a point to
19 percent, three points above the 35-year record low. Six percent
characterized the current period as a good time to expand facilities, up one
point. But a net negative 6 percent expect business conditions to improve over
the next six months, down 14 points from May.
Nathan Eddy is Associate Editor, Midmarket, at eWEEK.com. Before joining eWEEK.com, Nate was a writer with ChannelWeb and he served as an editor at FierceMarkets. He is a graduate of the Medill School of Journalism at Northwestern University.