Growth Strategies

Small-business Optimism Declines

A new survey uncovers a sharp drop in job creation plans as well as a decrease in the number of small-business owners who expect the economy to imp...
Stephen TaubJanuary 9, 2007

Optimism among small-business owners has dropped sharply, according to the latest monthly survey by the National Federation of Independent Business.

The NFIB’s Index of Small-Business Optimism fell to a level it hadn’t seen since last summer, due to a sharp drop in job creation plans as well as a decrease in the number of small-business owners who expect the economy to improve.

During the next three months, a seasonally adjusted net 10 percent of 446 survey respondents plan to create new jobs, “a remarkable decline” from the near-record 16 percent in October, according to the NFIB.

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The advocacy group also pointed out that 19 percent (seasonally adjusted) reported unfilled job openings, down 3 points from November and 8 points from October; 10 percent reported that the availability of qualified labor was their top business problem, down 2 points from November and 5 points from October. “Labor markets ended the year with strength,” said NFIB chief economist William Dunkelberg, in a press release, but “the first-quarter performance may not be as strong.” (Those small-business owners might be surprised to learn the results of another recent survey, however, in which more than 75 percent of workers said they are looking for new jobs.)

Meanwhile, a net negative 4 percent of survey respondents said they expect business conditions to improve over the next six months. This was a whopping decline of 15 percentage points from November, the survey pointed out. Even so, stressed the NFIB, this reading was actually higher than five of the monthly readings in 2006 and typical of readings later in an expansion.

And the percentage of owners who said they expect higher real sales reached the second-highest level in the last six months — “a solid reading,” wrote Dunkelberg. Even so, this sentiment was not as optimistic as in the first half of 2006, he added.