The latest NFIB Index of Small Business Optimism is out -- and it is not at all encouraging. Back in September the results of this survey seemed to indicate that we had some hope that the optimism that is at the core of entrepreneurs' DNA might be able to pull us out of this recession.
I reminded you about the old story of how we can spot a budding young entrepreneur -- he is the one who on Christmas morning can be found digging in a pile of manure in his backyard exclaiming, "I just know that pony I asked Santa for is in here, if I just dig deep enough."
It seems that the most resilient players in our economy may be losing hope. Entrepreneurs may have stopped digging.
The NFIB Index of Small Business Optimism lost 0.8 points in November, falling to 88.3 (1986=100).
What is particularly worrisome is that even in the depths of the 1981-82 recession, the Index never fell below 90 and quickly surged to a record high early in 1983. In this recession, the Index has been below 90 for six quarters, indicative of the severity of this downturn and the apparent hopelessness that is creeping across the land.
"The biggest problem continues to be a shortage of customers," said NFIB Chief Economist William Dunkelberg. "Apparently, owners can't find a good reason to be optimistic about the future of the economy or their personal future. The legislative agenda in Washington is a major factor blunting consumer and owner optimism."
When we dig into the latest survey a little deeper, we see that they may no longer believe there is a pony in the manure that is this economy.
Employment -- there is a net loss of jobs and few plans to add any new jobs in the foreseeable future. Small business owners who have survived to this point in the recession are cutting costs and hunkering down.
Capital Spending -- plans for any capital spending are at record lows. "Consumer spending is very weak, and there is nothing on the table in Washington to make owners more optimistic about the future. These conditions create a recipe for depressed expectations and spending plans," said Dunkelberg.
Inventories and Sales -- revenues in small businesses are anemic. Since they see little change in sales, inventories are continuing to drop. "Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stocks," said Dunkelberg.
Inflation -- price cutting is the name of the game. But, this is something that worries me. I still believe that inflation is a ticking time bomb. Higher tax rates and deficit spending that has gone out of the solar system will soon spark inflation. Add to that the news yesterday that the EPA may be opening a back door on regulating and in effect taxing so-called green house gases, and we have volatile brew that could create runaway inflation in a very short period of time.
Earnings -- profit trends continue to slide for small businesses.
Wages and Salaries -- Owners continued to reduce compensation at a record pace, with 10 percent reporting reduced worker compensation.
Credit -- For those who want to borrow, getting a loan continues to be difficult, with a net 15 percent reporting loans harder to get than in their last attempt.
I reminded you about the old story of how we can spot a budding young entrepreneur -- he is the one who on Christmas morning can be found digging in a pile of manure in his backyard exclaiming, "I just know that pony I asked Santa for is in here, if I just dig deep enough."
It seems that the most resilient players in our economy may be losing hope. Entrepreneurs may have stopped digging.
The NFIB Index of Small Business Optimism lost 0.8 points in November, falling to 88.3 (1986=100).
What is particularly worrisome is that even in the depths of the 1981-82 recession, the Index never fell below 90 and quickly surged to a record high early in 1983. In this recession, the Index has been below 90 for six quarters, indicative of the severity of this downturn and the apparent hopelessness that is creeping across the land.
"The biggest problem continues to be a shortage of customers," said NFIB Chief Economist William Dunkelberg. "Apparently, owners can't find a good reason to be optimistic about the future of the economy or their personal future. The legislative agenda in Washington is a major factor blunting consumer and owner optimism."
When we dig into the latest survey a little deeper, we see that they may no longer believe there is a pony in the manure that is this economy.
Employment -- there is a net loss of jobs and few plans to add any new jobs in the foreseeable future. Small business owners who have survived to this point in the recession are cutting costs and hunkering down.
Capital Spending -- plans for any capital spending are at record lows. "Consumer spending is very weak, and there is nothing on the table in Washington to make owners more optimistic about the future. These conditions create a recipe for depressed expectations and spending plans," said Dunkelberg.
Inventories and Sales -- revenues in small businesses are anemic. Since they see little change in sales, inventories are continuing to drop. "Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stocks," said Dunkelberg.
Inflation -- price cutting is the name of the game. But, this is something that worries me. I still believe that inflation is a ticking time bomb. Higher tax rates and deficit spending that has gone out of the solar system will soon spark inflation. Add to that the news yesterday that the EPA may be opening a back door on regulating and in effect taxing so-called green house gases, and we have volatile brew that could create runaway inflation in a very short period of time.
Earnings -- profit trends continue to slide for small businesses.
Wages and Salaries -- Owners continued to reduce compensation at a record pace, with 10 percent reporting reduced worker compensation.
Credit -- For those who want to borrow, getting a loan continues to be difficult, with a net 15 percent reporting loans harder to get than in their last attempt.
I doesn't look good right now and Obama knows it. Just today he started to turn his policies towards small business. But it's going to take a lot more than that to spark jobs.
I think we are just going to have to wait for the next administration before anything realy changes and they stop funneling all the money in the economy into the large banks and other failing businesses.
The next paragraph is courtesy of Smartbrief on Leadership. It underscores how the administration that says it wants to help small business and to spur job creation, is nonetheless pushing an economic policy that restrains those outcomes. To paraphrase Emerson, what President Obama is doing speaks so loudly that we cannot heed what he says. ESW...
"Uneasy over health care reform: For months there has been a prevailing consensus among economists that the rate of recovery from the current business recession would be slower than normal. Our SmartBrief on Leadership poll question last week hints at one possible reason. Fully one-third of those voting indicate that major decisions were postponed in their organizations because of uncertainty about the outcome of pending federal health care legislation. This is a remarkably high percentage, understanding that postponement of major decisions reflects a cautiousness that would bridle the economy. Theoretically, a result of one in 10 would have a noticeable effect. One in three certainly gets our attention." --Eva Schmatz, president, Summus Limited
When some of the proposals coming out of the health care debate appear to be around taxing "the rich" (some of which are small business owners who are caught in a regressive tax structure) and then forcing small business to buy insurance ("Here, let us tax you to pay for everyone's insurance. And oh, please pay again to insure all of your workers regardless of their age and if they smoke and drive your premiums up."), I'm not surprised people aren't making big expenditures.
I was at a business meeting last night with many small businesses and two of them were opening saying they would scale back so they were under the levels that they would get dinged.
Rather than encouraging growth, the uncertainty is stifling it.
The entrepreneur, creator of wealth and social justice. small entrepreneurial business is the future of our economy. ''The YES Movie'' www.TheYESmovie.com Stories of young entreprenuers by Louis Lautman
Inflation is a big concern of mine. Money is still very scarce among a large amount of the population. Billions are being pumped into the economy, but it doesn’t seem to be trickling down to the ones who severely need it. Good, educated, hard working people are still losing jobs and unable to find new jobs. If/when inflation hits there will be a lot of us who will not be prepared for it. The economy is deeply consumer driven, and us consumers are either unable to spend or are more cautious than ever to spend. It will be interesting if not worrying to see the results of this year’s holiday sales being that so many businesses depend on them.