Small business optimism wanes
According to the National Federation of Independent Business, small business optimism fell 1.3 percent last month after three months of improvements. The group says expectations for sales and the overall business climate fell, and the majority of business owners surveyed say they expect conditions to remain the same as they are now or to decline, while those expecting higher sales fell substantially. This news is unwelcome as the year began with small business optimism levels at historic lows in light of political and economic uncertainty.
This news falls on the heels of the U.S. Labor Department adding only 88,000 jobs, barely registering an improvement and remaining far below healthy levels, meanwhile the Institute for Supply Management reports growth has slowed in manufacturing as well as service companies.
NFIB Chief Economist, William Dunkelberg said in a statement, “Small business produces half the private GDP and employs half the private sector workforce. But it is not growing, not hiring, not borrowing and not expanding enough. Small business owners have been depressed since 2007 and that has not changed.”
The bright spot in a negative report
The bright spot in the otherwise negative report was in job creation which saw its fourth consecutive month of positive growth, as owners surveyed note an increase in employment at an average of 0.19 workers per firm during March, the best reading recorded by the advocacy group in a year. That said, 96 percent surveyed believe it is not currently a good time to expand substantially, far below the average between 1973 and 2007 of 83 percent.
More owners plan to reduce employment in the coming months than plan to create new jobs and more plan to reduce their inventories than plan to order new stocks.
Dunkelberg noted, “In the meantime, a record low percentage of small business owners claim that credit is their top business problem (3%) while taxes get the most votes (23%). Record numbers of owners have no interest in a loan (over 60%), because they have no use for the funds that have a high probability of successfully generating a return so the loan can be repaid.”
In closing, Dunkelberg opined, “The Fed has made sure that there is plenty of money to lend, but in the process may have reduced the confidence that borrows need to take risks, borrow, spend and expand. And then there’s the impact of fiscal policy (or the lack of a policy). The President is flying around the country doing fund-raisers and stumping for gun control, but he still has presented no budget proposal. Enough said.”