Few small businesses plan to hire
Many small business owners in the United States are reluctant to hire more employees in the near term as economic uncertainty and sagging sales continue to put pressure on company balance sheets, the latest index on small business optimism from the National Federation of Independent Business (NFIB) shows.
Of the 2,077 small businesses in NFIB’s membership surveyed, the number of companies planning to increase staff is down two percentage points to just nine percent, while 12 percent plan to reduce their workforce over the next three months. The report also shows employment has been reduced for the fifth month in a row with an average reduction of 0.1 workers per company.
“Small businesses seem to have the right number of employees,” said Holly Wade, senior policy analyst at the NFIB. “They’re breaking even. But until they see a pick-up in consumer spending there’s no reason to hire.”
Economic uncertainty is affecting consumer confidence and in turn small businesses. Twenty-six percent of business owners surveyed said poor sales are their main concern.
Wade doesn’t see anything inspiring more consumer confidence in the near future. “We don’t see anything on the horizon that would get small businesses to hire more and consumers to spend more,” she said.
At the same time, Sageworks has seen an increase in private company profit per employee with average profit per employee rising by 50 percent since 2009. The profit per employee has so far been $15,000 this year.
“Private companies have seen revenue growth between four to six percent,” said Libby Bierman, an analyst with Sageworks. “The companies are growing, but they’re not adding a lot of employees.”
Small business at a crossroads
– Jeff Stibel is the chairman and CEO of small business credit rating agency Dun & Bradstreet Credibility Corp. The views expressed are his own. –
What is a small business owner to make of the headlines?
Right now, leading indicators – like lending, hiring and optimism – paint a conflicting picture of the direction of the country’s small business sector. It’s no wonder we’d be confused. It seems one index rises, while another falls.
Take, for example, small business optimism. There’s no doubt we’ve come a long way from where we were at the bottom of the recession. But, the leading optimism index, calculated by the National Federation of Independent Business (NFIB), still looks like a seismometer in the days following an earthquake.
For the first two months of 2011, the numbers looked promising; optimism didn’t just rise slightly – it lunged forward. On a scale with 100 being the best and 0 being the worst, the index jumped from 92.6 in December 2010 to 94.5 by February this year. It’s a substantial gain from where we were at the bottom of the recession, when the NFIB reported numbers in the low 80s – 81.0 being the lowest.
But just when things looked up, numbers from March, April and May showed a drop – back more than 3 points – all but erasing recent gains and dropping to a level not seen since late last summer.
At the same time, lending statistics led us to believe something otherwise – and more encouraging – that small business health is rebounding. In fact, the Wall Street Journal recently reported that a Capital One survey showed 85 percent of small business owners felt they could access the loans they need – an increase of 15 percent from the year prior.
Small business confidence taking a beating
All those pundits who declared the current recession dead and buried, obviously haven’t been talking to small business owners.
Chapman University economists are the latest to announce the official end of the recession – with the codicil that the recovery will be more tortoise than hare.
In stark contrast to that report is the latest National Federation of Independent Business survey that shows small business confidence is locked in a downward spiral, that is worse than at any time during the last big recession in 1981-82.
The NFIB index showed a drop of 0.8 points in November – to 88.3 – from where it was in October and it represented the sixth time the index was below 90 since the current recession officially began 24 months ago. According to the NFIB, the index never fell below 90 at any point during the 1981-82 downturn and experienced a sharp rise at the beginning of 1983.
NFIB chief economist William Dunkelberg said the index’s current level was directly related to a lack of consumer spending. It seems not even a modest increase in Black Friday sales volume was enough to boost morale among small business owners.
“The biggest problem continues to be a shortage of customers,” Dunkelberg said in a statement. Among the 825 respondents to the NFIB survey, just 16 percent said they planned to make any capital expenditures over the next few months – the lowest total in 35 years. “Consumer spending is very weak, and there is nothing on the table in Washington to make owners more optimistic about the future.”
Dunkelberg said a continued lack of access to credit was further handcuffing small businesses and slowing job growth. In November small businesses reported a decline in average employment per firm of 0.58 workers during the prior three months, according to the NFIB. That represented a vast improvement over May’s record loss of 1.26 workers per firm, but not something that could lead someone to confidently proclaim the recession dead.
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Small Talk: Healthcare debate heats up
The healthcare debate is just starting to heat up for small business owners. FindLaw, a Thomson Reuters sister publication, has a nice blog post titled “Healthcare reform & small business: 3 bills explained,” in which they break down Obama’s “Affordable Health Care for American Act” legislation, that was approved by a slim majority of 220-215 by the House over the weekend.
In general the reaction by small business to the Obama legislation has been largely negative, with the most damning attacks coming from small business lobby groups, the National Federation of Independent Business and the National Small Business Association. In a Wall Street Journal story, titled “Small Business Crunches Numbers“, NFIB senior VP Susan Eckerly said the bill’s “punitive employer mandates and atrocious new taxes will force small business owners to eliminate jobs and freeze expansion plans at a time when our nation’s economy needs small business to thrive.”
Denver Business Journal reporter Kent Hoover examined the bill from a small business perspective in his article “How small business fares under health-reform bill“. In it Hoover said that while the majority of small businesses oppose the legislation, some support it because “they think the insurance market needs the bill’s reforms, such as barring insurance companies from denying coverage based on pre-existing conditions,” wrote Hoover, adding: “Plus, they think providing a government-run option in new health insurance exchanges would bring needed competition to the insurance market.”
Here’s a roundup of how politicians on both sides view the legislation:
- Democratic Congressman Jerry McNerney (Pleasanton, California) voted for the bill, because he explained that “as a former self-employed small business owner, I’ve personally experienced the effect of rising health care costs and the burden these costs place on our families and small businesses.” McNerney added the new legislation will “improve benefits and quality of care for seniors, help small businesses to stay open and operating, and stop insurance companies from denying coverage for pre-existing conditions or kicking sick people off their plans.” Read McNerney’s full statement here.
- Democratic Congressman Ben Chandler (Versailles, Kentucky) voted against the bill, telling the Lexington Herald-Leader: “I do not believe it is the best course of action for the people of Central Kentucky, specifically our working families, small businesses, and seniors.” Chandler said he was concerned that the new bill “would not adequately protect our rural hospitals and our small businesses — the engines of job creation.” Read Chandler’s full interview here.
- Democratic Congressman Anthony Weiner (New York, NY) released his own “Top 10″ list of reasons he voted for the bill, most of them tailored to his New York City constituents. In the Epoch Times story Weiner said the new Act helps small businesses that already provide health insurance, because they “will receive a tax credit over a two-year period, and small businesses with 25 employees or less with wages of less than $40,000 a year will qualify for tax credits up to half the cost of providing insurance.” Weiner added that 204,200 small businesses in NYC will be able to qualify for the tax credits.
Good informaiton. Here’s another article that parallels what you said. http://blogs.reuters.com/small-business/ 2009/11/09/small-talk-healthcare-debate- heats-up/
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