Small-business owners skeptical of recovery

Small-business owners haven’t seen much improvement in the U.S. economy and more are expected to cut jobs instead of adding them over the next three months, a monthly survey shows.

The National Federation of Independent Business Index of Small Business Optimism edged up 0.3 of a point in October to a reading 89.1, but the index has been below 90 for six straight quarters. In the 1980-82 recession, by comparison, the index fell below 90 for only one quarter.

“The October gain was minor, so the good news is still less bad news,” said William Dunkelberg, NFIB’s chief economist, in a statement.

Four of the 10 index components rose, while four declined and two were unchanged.

The main small-business index reached its lowest point in the current downturn in March, when it fell to 81.

Over the next three months, 16 percent (unchanged) of small-business owners surveyed said they plan to reduce jobs, while 9 percent (up two points) plan to add more workers.

In the prior three months, 8 percent of small-business owners created new jobs and 19 percent eliminated positions, NFIB said. “The ‘job generating machine’ is still in reverse,” the federation said.

The NFIB said small-business owners continue to reduce salaries and benefits “at a record pace” and have sharply scaled back capital spending because of a persistent weakness in consumer outlays.

A majority have reduced inventories and about 30 percent cut prices, resulting in lower profits.

“Poor sales and price cuts are responsible for much of the weakness in profits,” Dunkelberg said.

Only 11 percent of owners believe business conditions will improve in the next six months, which is historically low, the federation said.

Moreover, “there is nothing on the table in Washington to make owners more optimistic about the future, a recipe for depressed expectations and spending plans,” NFIB said.

“The recession is now 22 months old, straining the financial resources of more and more small firms,” Dunkelberg said. “The economy may have turned, but it’s a slow turn so far.”

(c) 2009, Inc. Source: McClatchy-Tribune Information Services.