Despite a positive uptick in sentiment since the last report, pessimism abounds within the small-business sector, as still far more of surveyed companies expect business conditions to be worse in six months than those who think they will be better, according to the most recent study from the National Federation of Independent Businesses (NFIB).
Among small-business owners surveyed, the top business problem was taxes, noted by nearly a quarter (23 percent) of respondents, while 21 percent mentioned regulations and red tape and 16 percent cited weak sales. Only 2 percent reported financing as their top business problem.
Nearly half (49 percent) of owners surveyed hired or tried to hire in the last three months, and 38 percent (out of 78 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions, suggesting a dearth of qualified talent existed in an industrial sector hungry for applicants.
"Small-business confidence saw an uptick this last month, but it was a ho hum, yawn, at-least-it-didn't-go-down reading. The subpar recovery persists for the small-business sector," Bill Dunkelberg, NFIB's chief economist, said in a statement. "Economic performance is contradictory—corporate profits are at record levels and the stock market hits new highs, yet GDP growth for the past six months has averaged about 1.5 percent and the unemployment rate is 7.5 percent. Nothing in the NFIB data suggests that the small-business half of the economy is expanding other than by an amount driven by population growth and associated new business starts now in excess of terminations. The lack of leadership in Washington and the resulting uncertainty depresses consumers' and business owners' willingness to spend and invest, and make bets on the future."
Only 4 percent of those businesses surveyed characterized the current period as a good time to expand, unchanged from last month and historically a very weak number, according to the report. Of those who said it was not a good time to expand, 62 percent cited economic conditions and 24 percent cited the political climate. The net percent of owners expecting better business conditions in six months was a net negative 15 percent, an increase of 13 points over March.
While the net percentage of all owners reporting higher nominal sales in the first quarter of 2013 compared with the fourth quarter of 2012 rose 3 points to a negative 4 percent—the best reading in 10 months—there are still more firms reporting declines than those reporting gains. Sales expectations improved 8 points from March to a net 4 percent, the study found.
Of small-business employers surveyed, 19 percent reported raising compensation and 3 percent reported reductions in worker compensation, yielding a net 15 percent reporting higher worker compensation (down 1 point from March). A net 9 percent of owners plan to raise compensation in the coming months, suggesting earnings trends are on an upward trajectory. Still, the report also revealed that plans to increase inventories, while gaining 5 points since March, rose only to a net zero percent of all firms.