Small Businesses Planning to Hire in 2012: Wells Fargo Report

By Nathan Eddy  |  Posted 2012-02-08

America€™s small business owners are the most optimistic since July 2008, according to the latest findings from the Wells Fargo/Gallup Small Business Index survey for the period Jan. 9-13, 2012. The Index now stands at positive 15 for January, compared with minus 3 in October and following two previous Index readings of 0 (neither optimistic nor pessimistic). The Index€™s future expectations component (forward looking 12 months) rose to positive 21 in January, an increase of 13 points from the survey€™s last reading, which occurred in October 2011.

More small-business owners expect to add new employees (22 percent) than expect to let them go (8 percent) over the next 12 months, an improvement over the previous survey readings. This quarter€™s 14-percentage point hiring/firing difference (those who expect to hire vs. fire employees) is the largest since January 2008 at the start of the financial crisis. In October, the hiring/firing difference was only 2 percentage points, with 15 percent expecting to add new employees and 13 percent expecting to let them go.

More than half the survey€™s small business owners (52 percent) said they hired employees in the past 12 months, which is little changed from the 51 percent reported in November 2010. However, of this group, more business owners say they have hired as many employees as needed (65 percent, compared with 48 percent in Nov. 2010) versus those who have hired fewer than needed (29 percent, compared with 42 percent in Nov. 2010), an indication of more stable operating environments.

While business owners indicate plans to hire in the next 12 months, they demonstrate some concern around hiring today. Only 15 percent said they are currently looking for new employees. Half all business owners surveyed said that as a general rule, they find it very difficult (21 percent) or somewhat difficult (32 percent) to find the right qualified employees for their business.

Driving the increase was a more bullish sentiment across several categories tracked by the survey, including revenues€”49 percent expect revenues to increase a lot or a little, up from 37 percent in Q4 2011€”and the overall financial situation€”63 percent expect their company€™s financial situation to be very or somewhat good over the next 12 months, up from 55 percent in Q4 2011.

Twenty-two percent said they expect the number of jobs at their company to increase a lot or a little, up from 15 percent in Q4 2011, while 8 percent expect the number of jobs at their company to decrease a lot or a little, down from 13 percent in Q4 2011. Slightly more than half (53 percent) said they expect their cash flow to be very or somewhat good, up from 48 percent in Q4 2011, while 27 percent said they expect credit to be very or somewhat easy to obtain, up from 22 percent in Q4 2011. However, 38 percent said they expect credit to be very or somewhat difficult to obtain, down from 43 percent in Q4 2011.

In addition to its future expectations component, the Index includes a present situation component (looking back 12 months), which improved to -6 in January, up from -11 in Q4, 2011 and the best reading in this component in three years. Driving this improvement was an increase in business owners who experienced increased revenues (33 percent), ease of accessing credit (25 percent) and increased capital spending (24 percent) in the past 12 months.

€œJanuary€™s increase in optimism signals that small business owners are seeing a brighter future,€ said Doug Case, Wells Fargo€™s small business segment manager. €œWhile this economy still presents challenges for many business owners, we are encouraged by expectations for improved revenues, financial situation and cash flow, which have the potential to drive job growth.€

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