Small Business Turns Against A Recovery

A new survey by The US Chamber of Commerce shows that small businesses do not believe an economic recovery is under way.  The data is important because, by most measures, firms with under 500 employees account for more than half of GDP and about the same amount of job creation.

Small business owners are pessimistic because the federal government has done little and will do little to lessen problems of the deficit and flattening GDP improvement. Nearly eight of ten respondents to the Chamber of Commerce survey said that they want “more certainty from Washington” and that “the debt and deficit have a negative impact on their businesses.” It is hard to see how this last point is true because it does not make economic sense. Interest rates are still low. Bank loans for small businesses are hard to get, but bankers are likely to blame the deficit for their caution.

It really does not matter why small businesses hold odd views about the government’s financial situation. Seventy percent of those questioned do not plan to hire new employees this year, and 9% say they may have to make more job cuts. If these opinions turn out to be the basis of decisions made about personnel at smaller companies, the job recovery is likely to disappear.

There have been a number of polls, the most extensive of which have been done by Gallup, that show many Americans believe that the recession never ended. Perhaps that is because their incomes are not rising or that they have friends and family members who have been out of work for months and who have little prospects to find new jobs. Or, it may be the increase in the price of gas and other commodities which has begun to kill consumer confidence.

Small business owners look at their world and see the same thing that many Americans do. A number of  people in Washington and many economists say that the economy is in the midst of a slow but nearly certain recovery. On Main Street, that is hard to believe.

Douglas A. McIntyre