Each passing month, each passing quarter, the news gets no better. The economy is going nowhere.
The National Federation of Independent Business Index of Small Business Optimism remains wallowing near its lowest levels since the NFIB first began this survey decades ago. In the 1980-82 recession the Index was below 90 in only one quarter. In this recession, the Index has been below 90 for six quarters, indicative of the severity of this downturn. The October index was 89.1. The baseline for this index is 100, which is based on 1986 responses.
The latest
NFIB survey found that the employment outlook is still anemic. The "job generating machine" of our economy, small businesses, is still in reverse. In addition to weak hiring, small business owners continued to reduce compensation at a record pace, with 11 percent reporting reduced worker compensation.
The latest survey from American Express OPEN also found that employers are cutting back on Holiday presents and bonuses to employees.
Some other highlights, or should I say "low-lights," from the latest survey:
- Capital spending is weak. Plans to make capital expenditures over the next few months fell 1 point to 17 percent, just 1 point above the record low last reached in August. Only seven percent characterized the current period as a good time to expand facilities, down 2 points from September.
- Only a net 11 percent expect business conditions to improve over the next six months.
- The net percent of all owners (seasonally adjusted) reporting higher sales in the past three months remained low at negative 31 percent, down 5 points and only 3 points above the record low last set in July.
- Small business owners continued to liquidate inventories, and weak sales trends gave little reason to order new stocks. A net-negative 26 percent of all owners reported gains in inventory stocks (more firms cut stocks than added to them, seasonally adjusted),
- Earnings continue very weak, which is cited as a contributor to the reported difficulties in obtaining credit.
"The recession is now 22 months old, straining the financial resources of more and more small firms. The economy may have turned, but it's a slow turn so far," said William Dunkelberg, Chief Economist of the NFIB.
Even though I tend to be a glass-half-full kind of guy, I do not share Dunkelberg's guarded optimism. Why? Washington continues to assume that government spending is the answer to our woes. Until they understand that small business needs tax and regulatory relief, I see no turnaround in our near future.
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