Small business optimism surges to highest level since the recession — but will it last?

August 22, 2013

On Main Street, employers are feeling better about the future than they have since the depths of the recession — an uplifting sign for the economy as a whole, which by most accounts, remains stuck in neutral.

A quarterly index of optimism levels among small business owners surged to its highest mark since 2008, bolstered largely by a sense that access to credit is improving. Conducted by Gallup and Wells Fargo, this is the index’s second straight increase, extending a sudden mood swing after readings dipped at the end of 2011.

“The survey has shown a slow and uneven recovery for small businesses, and this quarter we continue to see business owners express cautious optimism as economic trends improve, such as a strengthening housing market,” Doug Case, Wells Fargo small business segment manager, said in a statement about the latest findings. The survey is based on responses from 602 business owners and has a margin of error of 4 points.

A similar uptick was reported recently by the National Federation of Independent Business. The group’s small business optimism index, which is based on responses from 1,615 employers, edged up slightly in July, driven by an modest increase in hiring expectations.

It too was the index’s highest reading since the recession.

“But let’s not get too excited,” Bill Dunkelberg, the group’s chief economist, said in a statement, noting that the reading is still well below average optimism levels prior to the recession. The Wells Fargo/Gallup pollsters noted that their index also remains well below historic averages.

Meanwhile, the recent upswing begs the question — will it continue?

Recent history does not bode well.

The Gallup optimism reading, for instance, jumped into positive territory early in both 2011 and 2012 before sinking back down to very negative, pessimistic readings in the second half of each year. The NFIB’s numbers have also ebbed and flowed over the past few years.

There are also no signs of profit growth from small businesses, and sales numbers remain low, Dunkelberg says.

In addition, the degree to which the recent improvement in mood is tied to employers’ belief that loans will be more available in the year ahead could pose problems, as Federal Reserve officials recently suggested that a long-running small business lending slide may not end any time soon.

Follow On Small Business and J.D. Harrison .

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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