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Despite Record Stock Market Highs Small-Business Owners Pessimistic about Expectation for Growth

By Brandon Moseley
Alabama Political Reporter

Stocks are soaring.   Last year the major stock market indices all were up over the year and 2013 has been a banner year with the Dow up more than 10% since January 1.  That has not translated to small business owners.   The National Federation of Independent Business’ monthly Index of Small Business Optimism increased 1.9 points in February to 90.8 an improvement over the past several months but still below the trough of the 1991-92 and 2001-02 recessions.

Rosemary Elebash, state director of NFIB/Alabama, said what’s happening locally is a reflection of national trends.  Elebash said, “The bottom line is that small, family-owned businesses still don’t have a lot of confidence.  Small-business owners are still wary about where we’re headed.”

NFIB/Alabama is the state’s largest small-business association.

NFIB’s Chief Economist, Bill Dunkelberg, agreed, “While the Fortune 500 are enjoying record earnings, Main Street earnings remain depressed.  Far more firms report sales down quarter over quarter than up.”

Dunkelberg said, “Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the sequester,” he said. “Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship. Three-quarters of small-business owners think that business conditions will be the same or worse in six months. The Index gained almost 2 points last month; that was good news. But, until owners’ forecast for the economy improves substantially, there will little boost to hiring and spending from the small business half of the economy.”

Business owners reported that weak sales is still the top business problem.  The net percentage of business owners reporting higher nominal sales over the past three months was unchanged in February, at a negative 9 percent.  More owners reported declining sales than reported positive sales trends.

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13% of small employers reported profits higher quarter to quarter while 43 percent reported profits falling.
Both the Dow and the S&P 500 posted record highs this week.

The gains have come after strong corporate earnings reports, and has been driven by accommodative monetary policy from the Federal Reserve.  Concerns remain however over U.S. government gridlock, overseas economic weakness, and the growing federal debt.

Stock mutual funds continued to attract cash in February.   Bond funds also drew new money despite near record low interest rates.  In January and February a net $32 billion has flowed into stock mutual funds.  Net deposits into bond funds totaled $64 billion in the first two months of 2013.

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



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