[November 14, 2013]SPRINGFIELD -- Fall arrived
literally this month, as small business optimism dropped from 93.9
to 91.6, largely due to a precipitous decline in hiring plans and
expectations for future small business conditions, according to a
survey by the National Federation of Independent Business.
Of the 10 components of the NFIB Small Business Optimism Index,
seven turned negative, falling a total of 27 percentage points.
The stalemate in early October over funding the government as well
as the failed "launch" of the Obamacare website left 68 percent of
the business owners surveyed feeling that the current period is a
bad time to expand, and 37 percent of those owners identified the
political climate in Washington as the culprit -- a record-high
level.
State-specific data isn't available, but Kim Clarke Maisch, state
director of the National Federation of Independent Business, said
owners of small businesses here are just as worried as those in
other states.
"Small business owners need certainty," she said. "That isn't
what they've been getting from Washington."
Bill Dunkelberg, chief economist with the NFIB, said: "Washington
paralysis is never good news for the economy, so it was no surprise
that while politicians were arguing over whether or not the
government should remain fully operational, small business optimism
measures deteriorated.
"Small employers are not fooled by headlines announcing
record-high stock market indices; everyday they live the economic
realities of overregulation, increased taxes, weak sales and a
government without any direction or plan for the future," he said.
"The average value of the index since the recovery started is 91
-- 8 points below the 35-year average through 2007 and well below
readings typically experienced in a recovery," Dunkelberg said. "The
new budget deadline of Jan. 15, 2014, is approaching quickly, and
Congress continues to wrangle over the disastrous health care law
and little else. We shouldn't expect skies to turn blue anytime
soon."
The NFIB Optimism Index provides an opportunity to examine the
impact of major events with "before and after" interviews from small
business owners. In the case of the government shutdown, the
majority of the September survey responses were received a week
before the end of the month, and two-thirds of the 1,940 October
surveys were received and recorded by Oct. 20, the height of the
shutdown debate.
Thus, the two monthly surveys provide a very good "before and
after" analysis. Late in September, the likelihood of a shutdown
grew, but the September interviews were also mostly completed and
processed well before the end of the month.
Survey highlights
Job creation: Job creation was up in October. NFIB owners
increased employment by an average of 0.11 workers per firm in
October after September's decline.
Job openings:
Twenty-one percent of all owners reported job
openings they could not fill in the current period, up 1 point, and
15 percent reported using temporary workers, up 1 point from
September. Most of the jobs "created" will likely be dominated by
part-time workers as owners hedge their hiring while they try to
fathom the health care law regulations and penalties.
Sales:
The net percent of all owners* reporting higher
nominal sales in the past three months, compared with the prior
three months, dropped 2 points to a negative 8 percent. The net
percent of owners expecting higher real sales volumes fell 6 points
to 2 percent of all owners.
Earnings trends did not improve in
October, remaining at a negative 23 percent. Two percent of owners
reported reduced worker compensation, and 18 percent reported
raising compensation, yielding a net 16 percent reporting higher
worker compensation, down 1 point. A net 10 percent plan to raise
compensation in the coming months, down 3 points. Overall, the
compensation picture remained at the better end of experience in
this recovery but historically weak for periods of economic growth
and recovery.
Credit:
Credit continues to be a nonissue for small
employers, 6 percent of whom say that all their credit needs were
not met in October, unchanged from the previous month. Twenty-eight
percent of owners surveyed reported all credit needs met, and 53
percent explicitly said they did not want a loan (64 percent when
including those who did not answer the question, presumably
uninterested in borrowing).
Capital spending:
In October, the frequency of reported
capital outlays over the past six months rose 2 points to 57
percent. The percent of owners planning capital outlays in the next
three to six months fell 2 points to 23 percent.
Expansion plans:
Only 6 percent of owners characterized the
current period as a good time to expand, down 2 points from
September. The net percent of owners expecting better business
conditions in six months was a net negative 17 percent, 7 points
worse than September and 15 points worse than August.
Inventories:
The pace of inventory reduction continued in
September, with a net negative 6 percent of all owners reporting
growth in inventories, up 1 point from September. For all firms, a
net negative 5 percent, a 5-point drop, reported stocks too low, the
lowest reading since 2011.
Inflation:
Fourteen percent, an unchanged percentage, of the
NFIB owners surveyed reported reducing their average selling prices
in the past three months, and 16 percent, up 2 points, reported
price increases. The net percent of owners raising average selling
prices was 5 percent, up 4 points. As for prospective price
increases, a net 18 percent, down 1 point, plan price hikes. Twenty
percent, an unchanged percentage, plan on raising average prices in
the next few months, and 3 percent, up 1 point, plan reductions.
*All net percentages are seasonally adjusted unless otherwise
noted. The net percentage is the percent with a favorable response
less the percent of owners with an unfavorable response.
The current report is based on the responses of 1,940 randomly
sampled small businesses in NFIB's membership, surveyed throughout
the month of October. The
complete study
(PDF) is available at
http://www.nfib.com/sbetindex.
NFIB's
Small Business Economic Trends is a monthly survey of small
business owners' plans and opinions. Decision-makers at the federal,
state and local levels actively monitor these reports, ensuring that
the voice of small business is heard. The
NFIB Research Foundation
conducts some of the most comprehensive research of small business
issues in the nation. The National Federation of Independent
Business is the nation's leading small business association. A
nonprofit, nonpartisan organization founded in 1943, NFIB represents
the consensus views of its members in Washington, D.C., and all 50
state capitals.