Small Business Owners on Economy: 'Good News Is Still Less Bad News'

Even though they create more than half of nonfarm private gross domestic product and employ half of all private sector employees, small businesses have borne a disproportionate share of the broad dropoff in demand and cutbacks in bank lending. Moreover, because these firms lack the influence-peddling resources of their bigger and better-connected brethren, they have been shut out of many of the "rescues" and stimulus boondoggles that have benefited firms like Goldman Sachs and JPMorgan. Under the circumstances, it's no surprise that, as the leading association representing small and independent businesses reveals in its latest survey, "Small Business Owners [Are] Skeptical of Economic Recovery":

The National Federation of Independent Business Index of Small Business Optimism gained 0.3 points in October, rising to 89.1 (1986=100), 8.1 points higher than the survey’s second lowest reading reached in March (the lowest reading was 80.1 in the second quarter of 1980). In the 1980-82 recession period, the Index was below 90 in only one quarter. In this recession, the Index has been below 90 for six quarters, indicative of the severity of this downturn.

“The October gain was minor, so the good news is still less bad news,” said William C. Dunkelberg, NFIB chief economist. Four of the ten Index components posted gains, two were unchanged, and four declined.

Employment
Eight percent (seasonally adjusted) reported unfilled job openings, unchanged from August and September. Over the next three months, 16 percent plan to reduce employment (unchanged), and 9 percent plan to create new jobs (up 2 points), yielding a seasonally adjusted net-negative 1 percent of owners planning to create new jobs, a 3 point improvement. In the last three months, 8 percent of the owners increased employment, but 19 percent reduced employment (seasonally adjusted), both statistics are better than September readings. However, the “job generating machine” is still in reverse.