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Small Business Turns Pessimistic after Months of Gains

Small Business Turns Pessimistic after Months of Gains . / Credit: Deflated balloon image via Shutterstock

The small-business mood swing is not over yet, according to an index that gauges the optimism level on Main Street. After a promising start to the year — and six months of gains — small-business optimism dropped last month, largely as a result of diminished expectations for hiring and real sales growth. This came in spite of small-business owners reporting the largest increase in new jobs per company in a year.

The March survey results ended what appeared to be a steady, albeit slow, trend of improvement for the small-business sector of the economy. The survey conducted by the National Federation of Independent Business, a small-business advocate, based on responses from 757 randomly sampled businesses in NFIB's members membership.

Job creation in March was the bright spot in the index; the net change in employment per company seasonally adjusted was 0.22, far above January’s "0" reading. However, the decline in the percent of owners with a hard-to-fill opening and in the percent of owners planning to increase the number of workers employed indicate growing weakness in the job market and portend a rising unemployment rate, according to the NFIB. 

[Small Business Trends in 2012: Rough Forecast]

Though owners reported higher nominal sales over the past three months, gaining a surprising eight points, 22 percent reported "weak sales" as their top business problem, the survey showed. Concern about inflation is also growing, with 9 percent of owners saying it poses their No. 1 business problem, an increase from 6 percent in January.

"March came in like a lion, with Main Street seeing significant job growth in March—but it appears to have gone out like a lamb, and with no cheer in the forward-looking labor market indicators," said Bill Dunkelberg, NFIB's chief economist.  "What could have been a trend in job growth is more likely a blip. And what looked like the start of a recovery in profits fizzled out. The mood of owners is subdued—they just can’t seem to shake off the uncertainties out there, and confidence that the management team in Washington can deal with the effectively is flagging. What we saw in March is painfully familiar – this was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself—and not in a good way."

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.