News Column

Small-business Confidence Down to 'Recession Levels'

Jan. 8, 2013

Tim Devaney

businessman in corner

The fiscal cliff put a chokehold on the economy in December, according to a survey of business confidence, and many small companies expect it to get worse in the foreseeable future.

Following November's historically low report from the National Federation of Independent Business, the organization's Small Business Optimism Index edged up less than one point to 88. That's the second lowest reading since March 2010, and it came at a time when business usually peaks for the holidays. The disappointing results led the NFIB to refer to the survey as a "recession-level reading."

Current jobs openings and plans to increase employment over the next few months were down from November, while sales and capital expenditures saw little growth.

The NFIB blamed the poor results on the lasting effects of the fiscal cliff.

"Congress played chicken right up to the end of the year, leaving small business owners with no new information about the economy's future -- no sense of how much their taxes would increase or if the economy would go over the now infamous 'cliff,' " NFIB chief economist Bill Dunkelberg said in a statement.

What's worse: There's no certainty that the economy will pick up where it left off and move forward now that the country is past the fiscal cliff.

"The eleventh hour deal has brought marginal certainty about tax rates and extenders and will provide some relief to owners," Mr. Dunkelberg said, "but it certainly doesn't guarantee a more positive forecast for the economy."

In December, 70 percent of owners said it was a bad time to hire or invest. Few jobs were added during the month. No employment changes were made by 76 percent of the owners surveyed, while 11 percent, added an average of 2.9 employees, and 13 percent cut back by 1.9 workers. The numbers leveled out.

Furthermore, future hiring plans weakened, falling 4 points to 1 percent of employers. Political uncertainty stopped one in four employers from expanding. They listed the top business problems in the way of hiring as taxes (23 percent) and regulations (21 percent). Poor sales came in third at 19 percent.

"December's reading is certainly not typical during a recovery," the NFIB said.

Sales showed some improvement, but still weren't a positive for small businesses: 18 percent of owners reported higher sales, but 30 percent reported lower sales. That was a 5-point improvement from the previous month.

The credit markets didn't fair much better.

"Desire for new lines of credit is weak among small business owners," the NFIB said. Fifty-two percent are not looking for a loan, and 29 percent said their credit needs had already been met.

NFIB randomly surveyed 648 of the organization's small business members in December.

Source: (c)2013 The Washington Times (Washington, DC) Distributed by MCT Information Services

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