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Small Business Pessimistic Over Economy and Elections

By Brandon Moseley
Alabama Political Reporter

The National Federation of Independent Businesses (NFIB) reports that in their September survey most small businesses were postponing hiring decisions until after the November 6th election.

The state director of NFIB/Alabama Rosemary Elebash said, “Small-business owners are telling us that the political climate is more of a concern to them right now than the economy is,” she said. “Small-business owners are in a holding pattern. They’re spending only where necessary, and they aren’t hiring, expanding or ordering more inventories until the future becomes more certain.”

The NFIB’s chief economist William Dunkelberg said in a written statement, “The election is just weeks away and essentially a horse-race, and its outcomes would have vastly divergent policy implications.   Everyone is waiting to see what happens, especially small-business owners who have a lot at stake in the outcome—which could mean higher marginal tax rates and more deficits, OR lower marginal tax rates and less government.”

The group’s survey showed that September was yet another month of low expectations and pessimism for small businesses.  The NFIB Small Business Optimism Index lost another 0.1 points and fell to 92.8.

21% of small business owners report that slow sales is their #1 business problem.  That percentage has steadily dropped since it peaked at 34% in March 2010.  Only 1% of business owners are predicting that they will have higher sales in the coming months.  That is down from a high of 12% in February.  This is an indicator of a poor economic outlook because when business owners are pessimistic they are less likely to expand their businesses, add more inventory, or increase their payrolls.

Only 21% of small business owners reported that they were planning new capital outlays in the next three to six months.  That is a drop of 3 points, however the index of business owners who are expecting better business conditions rose 4 points.  This follows an increase of 6 points in the previous month.

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According to the NFIB’s survey small business owners created fewer jobs in September than they did in the previous two months.  Only ten percent of small business owners reported plans to increase employment.  That is down 3 points from August.  The percentage of small business owners reporting that they planned to reduce jobs stands at 11%.  10% reported hiring additional workers with an average addition of 2.2 workers per firm.  Of those who reduced workers in the past few months they average a reduction of 3 workers.  51% of small business owners reported that they tried to hire workers in the past three months.  41% reported that there were few or no qualified applicants for those positions.   Only 17% of small business owners reported that it was hard to fill job openings.  That is a drop of one point from the previous survey.

According to analysis in the report, “Consumer spending has barely advanced this year, and consequently so has job creation. Employment is still 4 million lower than it was in the first quarter of 2008 (first quarter). The population grows about 1% annually. A few more jobs are needed to take care of that, and that seems to be about all we are getting.”

Only 6% of small business owners reported that they had raised prices in September.  Only 2% reported reducing worker compensation in September while 16% reported raising worker  compensation.  10% reported that they were planning to increase worker compensation in the next three months.

The NFIB/Alabama is the state of Alabama’s leading small-business association.  The NFIB’s Small Business Economic Trends is based on random sampling of 691 NFIB member businesses that were surveyed throughout the month of September.  The NFIB is a nonprofit, nonpartisan organization that was founded in 1943.

To view the whole report: http://www.nfib.com/sbetindex

Brandon Moseley is a former reporter at the Alabama Political Reporter.

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