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Small Business Owners Optimistic But No Plans To Expand

Subrina Hudson |
September 21, 2012 | 9:05 a.m. PDT

Staff Reporter

Small business optimism slightly up but still a "solid recession reading." (Trawin/Flickr)
Small business optimism slightly up but still a "solid recession reading." (Trawin/Flickr)

The following is part of our series wading through the economic jargon, Crunching Numbers.

 

Small business owners overall felt more optimistic in August but many continue to keep expansion plans on hold, according to the monthly small-business optimism index reported last week by the National Federation of Independent Business.

The index gained 1.7 points, rising to 92.9 compared with 91.2 in July. Since the U.S. economy began to recover in mid-2009, the NFIB’s index has rebounded from its lows but remains far below the peak readings of nearly 110 in the mid-2000s.

The latest number is still a “solid recession reading,” according to the NFIB. 

“We haven’t improved enough to have any sort of meaningful growth in the small business sector,” said Holly Wade, a senior economic analyst at NFIB in Washington, D.C.

“In previous recessions, the recovery part of it has always been more extreme and more robust than what we’re finding in this one,” she said.

The monthly survey is based on the responses of 736 randomly sampled small businesses in NFIB’s membership.

The survey showed a net 22 percent of owners felt it was a bad time to expand because of political uncertainty – a record high for this business cycle, NFIB said.

Despite the negative readings, a boost in small business owners’ expectations for better economic conditions in six months helped to lift the index overall in August.

“They’re obviously seeing something out there that looks promising, which is kind of ironic given the state of the elections and how contentious everything is and the fiscal cliff,” Wade said. "Even in the worst atmospheres you can see sparks of progress.”

Whatever the outcome of the November elections, the results could at least give small business owners a clearer picture of what to expect from Washington and how to plan for it, Wade said.

The NFIB was one of the lead plaintiffs in the U.S. Supreme Court case challenging the Affordable Care Act, known as Obamacare. The court in June upheld the health care law.

Business owners’ concerns about the health care law’s costs reflect their views on government regulation in general.

Small businesses make up half of the U.S. gross domestic product and roughly half the private workforce, said Wade. She said that the survey revealed net small business job growth in August was essentially zero, mirroring the slowdown in job growth across the economy. 

Reports of weak consumer spending were also reflected in the survey. The net percentage of small business owners reporting seasonally adjusted higher sales over the past three months fell for a fourth straight month.

In recent years, “poor sales” routinely ranked as the “single most important business problem” in the NFIB’s survey, Wade said. Yet, over the past six months, “taxes” and “government regulation” have claimed the top spots on that list. 

“Those things are what the state, local and federal [governments] can try to help alleviate,” Wade said. 

She added that the problem is two-fold because a portion of small businesses are most worried about issues that have the potential to be resolved rather than waiting out the business cycle.

Sé Reed, a web design consultant and founder of {open} bookstore in Long Beach, Calif., said most small businesses are naturally optimistic. 

That view may be establishing a new normal or baseline of small business owners’ expectations, Reed said, who also serves as a specialty business adviser with the Small Business Development Center hosted at Long Beach City College. 

If businesses continue to see signs that the recovery is continuing, many will see it as an incentive to slowly expand, she said.

She said many of the businesses she has talked with are struggling but still feel optimistic because “they have weathered the storm” of the deep recession.

“I think everyone is becoming more realistic about what’s possible instead of expecting things to be booming like they were before 2008 and 2009,” Reed said.

 

Read more from Neon Tommy's Crunching Numbers series here.

Reach Staff Reporter Subrina Hudson here.



 

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