Small Business Optimism Index Falls for Second Straight Month

The National Federation of Independent Business (NFIB) reported that its small business optimism index fell 0.2 points in July to 91.2. The most frequently cited issues for small business owners in July were taxes and regulations (21% for each), which replaced sales (20%) as small business owners’ most important problem.

The NFIB’s chief economist said:

Congress has recessed without a plan to resolve our calamitous debt/spending cycle or a lasting answer to our dangerous fiscal cliff. … The lack of meaningful actions to address tax reform in Washington adds to the certainty of sluggish growth for the remainder of 2012, and the uncertainty of what will come in 2013.

Some 79% of the owners made no net change in the number of employees during July, while 10% hired an average of three workers over the past few months and 11% reduced employees by 2.3 workers.

Business owners reported that 48% of them hired or tried to hire in the past three months, and 38% reported few or no qualified applicants for positions. The percentage of owners reporting hard-to-fill jobs remained steady at 15% of all owners.

Overall, the NFIB had this comment:

According to July’s report, more owners indicated that they expect business conditions will be worse (and not improved) in six months, and more owners expect real sales volumes to be lower than those who expect them to be higher in three months. This in part explains the lack of any need to hire more workers or to buy new inventory. Job creation plans are historically very low; only five percent of owners think the current period is a good time to expand.

The NFIB press release is here and the full report is available here.

Paul Ausick