Few investors feel confident about the chances for a quick economic recovery, but pessimism runs particularly deep for owners of small businesses, a sector unable to perform its historic role of leading the nation out of recession by driving innovation and creating jobs.
A minority of affluent investors surveyed in June believe the job market will improve within the year, but business owners express the deepest skepticism about the nation’s employment outlook. About 23 percent of the more than 1,300 survey participants said they were confident the job market will improve in the next six months to one year. Small business owners held an even more negative outlook with just over 16 percent agreeing that the job market would improve by next summer. In fact, 60 percent of business owners disagreed or strongly disagreed with the statement.
The economic slowdown has also imposed more austerity measures on small business owners, who are more likely than other occupations to save more and spend less in the post-recession era. Our research shows that 58 percent of small business owners will reduce spending as a result of the current economy, as opposed to 53 percent of participants as a whole. Business owners also show the strongest tendency to save – 58 percent versus 48 percent for investors as a whole. Taxes are also more likely to concern business owners (73 percent) than investors as a whole (57 percent).
Business owners also expressed declining confidence in an index compiled by the National Federation of Independent Business. The most recent Index of Small Business Optimism reported a third consecutive monthly drop when it fell 0.3 points to 90.9 – a recession-level reading in May. One in four owners identifies weak sales as their top business problem and says spending is weak, especially in the services sector, which is dominated by small businesses.
“It is simple: when sales pick up, owners will have a reason to hire more workers to take care of customers, to produce more output and will have a reason to invest in new equipment and expansion,” said the NFIB in a prepared statement.
Index results also point to weak job creation and business expansion with a 1 percent drop in business owners planning to create new jobs and 5 percent fewer businesses owners who view the present as a good time to expand.
“The May survey indicated that there was very little job creation on Main Street in May and that they unemployment rate would rise, and, unfortunately, this turned out to be the case,” said NFIB.