Small Business Owners’ Confidence Plunges

The National Federation of Independent Business (NFIB) reported that its small business optimism index fell 3 points in June to 91.4, the lowest level since October of last year. The most frequently cited (23%) issue for small business owners was weak sales. Another 21 % cited taxes as their biggest issue and unreasonable regulation was cited by 19%.

In the past few months just 9% of business owners added an average of 2.6 workers while 12% reduced their number of workers by an average of 2.8%. The other 79% made no change to their employment numbers. From the NFIB announcement:

Forty-four (44) percent of the owners hired or tried to hire in the last three months and 33% reported few or no qualified applicants for positions. The percent of owners reporting hard to fill job openings lost 5 points, falling to 15% of all owners. This was a strong reversal of May’s result and suggests the unemployment rate will rise. Not seasonally adjusted, 10% plan to increase employment at their firm (down 7 points), six percent plan reductions, up 1 point.

The NFIB noted that the impact of the Supreme Court decision upholding the healthcare act is not included in this month’s report:

The health care decision was probably not what most owners expected, so “disappointment” over that will be reflected in the July survey responses. With over 20 new taxes ($800 billion) and most of the regulations yet to be written by HHS, the implications for employee costs remain unclear.

On the jobs front, the NFIB had this comment:

Job creation will be very weak in June and plans for July look even worse, so there will be very little progress on the jobs front in the coming months. No inflation issue on Main Street and there is nothing the Federal Reserve can do to increase employment.

Actually, though, there is something the Fed could do: raise its inflation target from “around 2%” to something around 3% to 4%. Any chance that will happen before the November elections is infinitely small.

Paul Ausick