Small business optimism suffers largest decline in two years


Small business optimism dropped last month to its lowest level since October, according to the NFIB. (Scott Halleran/GETTY IMAGES)

Slowly but surely, small business optimism had been improving over the last several months.

Not anymore.

Small business owners’ spirits plummeted last month, according to the National Federation of Independent Business’ latest optimism index, which dropped to an eight-month low of 91.4 in June, completely erasing modest gains over the first five months of the year. The drop from 94.4 in May marks the largest month-to-month decline since June 2010.

“All in all, this month’s survey was a real economic downer,” NFIB Chief Economist William Dunkelberg said in a statement. “The economy has definitely slowed; job growth will be far short of that needed to reduce the unemployment rate unless lots of unemployed leave the labor force—no consolation.”

Deepening concerns over earnings, raw sales and political uncertainty pulled the reading down. Even more alarmingly, given the stubbornly high unemployment rate and small businesses’ reputation as a consistent job engine, the net change in employment per company dropped last month for the first time this year.

“The report shows that small business optimism has dramatically regressed to October of last year, and the outlook for hiring is not promising,” Rep. Sam Graves (R-Mo.), Chairman of the House Small Business Comittee, said in the wake of the survey, later suggesting that the president’s economic strategies are slowing the recovery. “This is further proof that the policies being promoted from the White House simply are not encouraging our nation’s primary job creators.”

Dunkelberg noted that the survey was taken prior to the Supreme Court’s monumental decision to uphold the president’s health-care law, leaving his group waiting until next month to evaluate the ruling’s impact on small business confidence.

For the time being, the following was evident in this latest index:

• The overall change in employment per firm over the past few months was -0.11. Forty-four percent of business owners hired or tried to hire in the last three months; however, one in three reported few or no qualified applicants for their open positions.

• Disappointing sales numbers remain the most oft-cited problem (23 percent) for small business owners, trailed closely by taxes (21 percent) and regulations (19 percent).

• The number of business owners reporting capital outlays over the past six months dipped 3 percentage points (down to 52 percent), as did the number planning to spend in the next three months (down to 21 percent).

• Barely more than one in four (26 percent) respondents reported higher sales last quarter than the quarter prior. While that’s up one point from the previous month, so was the number that reported lower sales (28 percent).

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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