Small Business Optimism Falls Amid Government Travails

Small Business Optimism Falls Amid Government TravailsOptimism among small business owners took a hit in October, according to a national index that found a decline in hiring plans and dim sales expectations.
Small business sentiment dropped from 93.9 to 91.6, according to the National Federation of Independent Business.
Of the ten index components, seven turned negative, falling a total of 27 percentage points.
The stalemate in early October over funding the government, and the troubled launch of the Obamacare website left 68 percent of owners feeling that it’s a bad time to expand; 37 percent of those owners identified the political climate in Washington as the culprit, a record high level, the NFIB said.
“Washington paralysis is never good news for the economy, so it was no surprise that while politicians were arguing over whether or not the government should remain fully operational, small-business optimism measures deteriorated,” said NFIB chief economist Bill Dunkelberg.
Here are highlights from the NFIB’s October report:
•    Job creation was up in October. NFIB owners increased employment by an average of 0.11 workers per firm in October after September’s decline.
•    Hard to Fill Job Openings. Twenty-one (21) percent of all owners reported job openings they could not fill in the current period (up 1 point), and 15 percent reported using temporary workers, up 1 point from September. Most of the jobs “created” will likely be dominated by part-time workers as owners hedge their hiring while they try to fathom the health care law regulations and penalties.
•    Sales. The net percent of all owners* reporting higher nominal sales in the past three months compared to the prior three months dropped 2 points to a negative 8 percent. The net percent of owners expecting higher real sales volumes fell 6 points to 2 percent of all owners.
•    Earnings and Wages. Earnings trends did not improve in October, remaining at a negative 23 percent. Two percent of owners reported reduced worker compensation and 18 percent reported raising compensation, yielding a net 16 percent reporting higher worker compensation (down 1 point). A net 10 percent plan to raise compensation in the coming months, down 3 points. Overall, the compensation picture remained at the better end of experience in this recovery, but historically weak for periods of economic growth and recovery.
•    Credit Markets. Credit continues to be a non-issue for small employers, 6 percent of whom say that all their credit needs were not met in October, unchanged from the previous month. Twenty-eight (28) percent of owners surveyed reported all credit needs met, and 53 percent explicitly said they did not want a loan (64 percent including those who did not answer the question, presumably uninterested in borrowing).

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