Dr Jeff Cornwall

Small Business Owners Still in Recession Frame of Mind

September was another month of low expectations and pessimism for the small-business community, with the NFIB Small Business Optimism Index losing 0.1 points and falling to 92.8. The recession-level reading was pulled down by a deterioration in labor market indicators, with job creation plans plunging 6 points, job openings falling one point and more firms reporting decreases in employment than those reporting increases in employment.

The survey shows that key elements that will be needed for small businesses to, once again, help pull us out of a recession are just not improving:

  • Capital spending is clearly in a “maintenance mode.”  Business owners are keeping things running and replacing things when absolutely necessary, but they are not rushing out to expand space and equipment.  The continue to be in a hunker down frame of mind, which is a good way to be for the foreseeable future.
  • Sales continue to be sluggish.  The source of cash we need to pull us out of a recession is not more access to debt.  That is absolutely the worst approach.  The  economy is fragile and small businesses are financially on the edge in many cases.  Debt issued to small businesses may feel good for a very short period of time as it might fix immediate cash flow concerns, but it only makes things worse if sales do not improve.  Debt payments increase the company’s overhead which makes operational cash flow even more strained.
  • Spending by consumers will only improve when their employment improves and their confidence in continued employment is strengthened.  Right now these things are nowhere in sight.