News Column

Small Businesses Upbeat About Economy, But Still Troubled

May 14, 2013
hispanic businessman

Small-business owners were more optimistic about the economy in April, but "pessimism abounds" in a sector that is barely growing, the National Federation for Independent Business said Tuesday.

The trade group's Index of Small Business Optimism increased 2.6 points to 92.1 last month after dropping in March. The change was driven by higher expectations that the economy will improve, projections of improved sales and more plans to hire new employees.

Still, the April figure was barely above the 90.7 monthly average since the end of the Great Recession, and below the 94.5 reading a year earlier.

"The sub-par recovery persists for the small-business sector," said Bill Dunkelberg, the group's chief economist.

Although the stock market is hitting record highs and corporate profits are soaring, the small-businesses sector is only expanding enough to keep up with population growth, he said.

Policy gridlock in Washington, where lawmakers and the White House are wrestling over deficit reduction, is adding to the uncertainty of small-business owners, Dunkelberg said.

Small businesses increased hiring in April for the fifth straight month, but the NFIB said the growth was lackluster, with the 1,873 randomly sampled employers reporting they added an average of 0.14 workers. That was slightly lower than in March.

Expectations for sales improved in April as did the view of the economy.

Though there was a significant gain in the number of small-business owners who expected economic conditions to improve, they still were "very pessimistic," the report said.

Overall, the group's index for expectations that the economy would improve over the next six months was a negative-15%. The figure is determined by subtracting the percentage of respondents who think the economy will be worse from the percentage who think it will be better.

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