Two reports on small business job creation were released today.  The bottom line is that there is little evidence that small businesses are ready to lead us out of this long and hard recession.

The Intuit Small Business Employment Index rose ever so slightly in June, showing employers adding a small number of jobs and slight increases in hours worked and compensation.

But the NFIB survey were less encouraging.

“Seasonally adjusted,
9 percent of owners hired new employees last month, a 1 point decline from May,
while 16 percent reduced employment, a 3 point increase”, said William Dunkelberg, Chief Economist of the NFIB.  “The remaining 75
percent of owners made no change in employment. Manufacturing was the only
winning sector to post average positive net growth; but job losses were posted
by firms in financial, non-professional services, construction, negating any
gains made.”

Both surveys found some hope for July, but we have seen the optimism among entrepreneurs rise and fall throughout this long economic morass. 

One of my colleagues, Jose Gonzalez, was co-founder of Conexion Americas here in Nashville before he joined our faculty.

The video below reinforces why for generations people have come to the U.S. — to find economic freedom and the opportunity to prosper.  This video captures why we must fight so hard to protect our liberty and our free enterprise system.

As I feared, things are looking bleak on Main Street.

Chief economist for the NFIB William C. Dunkelberg, issued the following statement on May job numbers, based on NFIB’s monthly economic survey that will be released on Tuesday, June 7, 2011.

“After solid
job gains early in the year, progress has slowed to a trickle. The two NFIB
indicators–job openings and hiring plans–that predict the unemployment rate
both fell, suggesting that the rate itself will rise. 

“May’s job
numbers will disappoint; meaningful job creation on Main Street has
collapsed. 

“Twelve
percent (seasonally adjusted) of small-business owners reported unfilled job
openings (down 2 points). Further indications of minimal future growth include
the fact that in the next three months, 13 percent plan to increase employment
(down 3 points), and 8 percent plan to reduce their workforce (up 2 points).
That yields a seasonally adjusted net negative 1 percent of owners planning to
create new jobs, a 3 point loss from April.

“Overall, reports of job reductions have
returned to historically normal levels. However, the percent of owners hiring
has not recovered to levels historically observed after two years of expansion.
With one in four owners still
reporting ‘weak sales’ as their  No. 1 business problem, there is little
need to add employees, especially with the uncertainty about future labor costs
arising from new regulation and legislation. And, if Congress doesn’t deal
effectively with the trillion dollar deficit, we’ve got plenty to keep us
worried.”

Plenty to keep us worried indeed.  Remember that almost every past recovery has been led by small business owners.

And we still have to worry about inflation even with a possible double dip recession…..

Keep on hunkering down….This economic morass ain’t even close to being over.

In addition to some not so good hard economic data coming out lately, there is a growing pessimism among entrepreneurs and those who pay attention to entrepreneurs in our economy.

As I wrote last week, the latest NFIB survey of small business owners does not paint a rosy picture of their mood. The results of the survey are out this morning and once again we see a decline in their optimism this month.

“A second consecutive month of decline in small-business optimism does very little to encourage further confidence in a strong economic recovery,” said NFIB Chief Economist Bill Dunkelberg. “Owners simply find no reason to be optimistic about the future and therefore they find no reason to pick up the pace of spending and hiring. It’s difficult to know exactly why the outlook for small firms is in decline; but it’s a safe bet that political and economic uncertainty–about the deficit, the threat of inflation, rising energy and health care costs–are at top of the mind for most small-business owners. Who is going to stay positive in this turbulent political environment?”

The Kauffman economics bloggers (of which I am one) also share the lack of optimism found among business owners.

“Uncertain” continues to be the word they would use most to describe economy.  In fact, 85% view current economic conditions as “mixed” or “facing recession,” up 8% from first quarter of 2011.  And if that isn’t enough, 32% believe the country is doing “worse” than official statistics show.

Small business owners are putting their pessimism into action, or should I say a lack of action according to the NFIB survey.

Only 50 percent of all firms reported making capital outlays last month,
down 1 point from the month prior. The percent of owners planning
capital outlays in the next three to six months fell 3 points to 21
percent, a recession level reading. 

Money is cheap, but most owners are
not interested in a loan to finance equipment they don’t need. 
Prospects are still uncertain enough to discourage any but the most
profitable and promising investments.  A wise position to take from my perspective.

We are seeing many small business owners begin to take action to deal with inflation.  (I know, I know…what inflation, if we believe the government’s cooked and filtered inflation statistics).  In April, a net 12 percent reported raising average selling prices, a 3 point gain from March and 23 points higher than last September. A net 24 percent planned hikes in average selling prices in April.

So what do business owners and economists agree on?  More recessionary times yet to come, coupled with the new reality of inflation.

The Kauffman Foundation has connected what they consider the nation’s top economics
bloggers.  Although not all of us are economists, we all write our blogs with commentary on economic policy and/or trends.

Each quarter they survey us to see where we think things are in the economy.  We are an eclectic bunch, with a variety of journalists, academics, consultants, and just good old fashioned pundits.

This quarter the group was slightly more positive than the past quarter. 

Although 77 percent continue
to describe the economy’s overall condition as “mixed,” “facing
recession,” or “in recession,” 23 percent now believe the
economy is “strong and growing” or “strong with uncertain
growth”.

Here is the word cloud from our open ended response to the state of the economy:

This survey was from a few weeks ago.  Wonder what renewed inflationary pressures, record federal deficits, and unrest around the globe will do to change our collective perspective next quarter…

Entrepreneurs are the job engine in our economy during good times and bad.  They are the primary creators of new jobs leading our growth during booms, and they lead job creation coming out of recessions.

The latest job creation figures from the Intuit Small Business Index suggest that while job growth is somewhat better than last year this time, job creation among small businesses is not at the levels we need to spur a recovery.

This index showed modest job creation in August, with at estimated 39,000 new jobs created.  However, September data showed only 27,000 new jobs created.  Additionally, there was no increase in hours worked or compensation.  If these figures had improved we could hold out hope that small  businesses were growing through increased productivity.  But, this is not the case. 

These figures mirror the drop in intention to hire new employees found in other surveys of small business owners over the past few weeks.

There is no sign that small businesses are ready to lead a recovery any time in the foreseeable future.

All of this is evidence that supports the growing consensus that we are in for a prolonged period of high unemployment.

Top economics bloggers are feeling a renewed sense of pessimism about the U.S. economy, according to a new Ewing Marion Kauffman Foundation survey released today. Sixty-eight percent of economics bloggers who responded to the mid-July survey described the economy’s overall condition as “mixed,” with the rest split three to one toward an assessment of “weak” rather than “strong.” Worse, only 5 percent of respondents believe the economy is “better than official government statistics show,” while 47 percent think it is worse.

For this third Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers, the Kauffman Foundation sent invitations to more than 200 leading economics bloggers as identified in the Palgrave’s econolog.net December 2009 rankings. (NOTE:  I was one of the bloggers surveyed).  The Foundation surveys the bloggers each quarter about their views of the economy, entrepreneurship and innovation.

“Uncertainty is casting a shadow over the economy as well as the debate about the economy,” said Tim Kane, senior fellow at the Kauffman Foundation and author of the study. “There is good news in the forecast, but it seems to have left the country. Expectations of global growth are more than double the projection for U.S. incomes. And bloggers’ frustration with Congress seems to have hit a boiling point as well, yielding a grade point average of 0.8 on a four-point scale, which is roughly half the grade point given to Wall Street firms.”

Research highlights include:

• None of the respondents assessed the U.S. economy’s overall condition as “strong and growing.” Overall opinion has shifted sharply negative since the previous quarter. Many bloggers acknowledged the possibility of a double-dip recession in response to a question from Econbrowser.com’s James Hamilton: the average probability among respondents was 44 percent.
• The bloggers expect the U.S. budget deficit to grow stronger than any other variable over the next three years. They also see higher poverty (doubled from second-quarter expectations) and inequality levels in the United States, meager stock market growth, and a slight decline in U.S. competitiveness. On a brighter note, three-year projections also include a relatively strong increase in global output.
• A large majority–70 percent–of the surveyed bloggers say the federal government is too involved in economic matters, despite the largely non-partisan identification of the respondents.

The response that gave me the biggest concern was about small business.  A majority (57 percent) believe conditions for small business in particular are “bad” or “very bad.”

Not good news for entrepreneurship — the engine of economic recovery.

On Monday, July 26th, the U.S. Chamber of Commerce [“the Chamber”] will partner with the National Federation of Independent Business [NFIB] and the American Action Forum [“AAF”] to host a forum entitled “Behind the Curtain: The Health Care Law’s Impact on Small Business”. The event will feature Washington experts and opinion leaders, as well as the entrepreneurs who run small businesses and create American jobs. Some of the highlights will include:

• Senator Mike Johanns (R-NE), who recently introduced S. 3758, the “Small Business Paperwork Mandate Elimination Act”, a bill to protect small business owners from the financial burden of filing the endless amount of 1099 forms the health care law requires.
• Scott Womack, an IHOP franchisee who has created 100s of jobs, who also crunched the numbers and has serious concerns about the effects the new health care law will have on his company.
• Doug Holtz-Eakin, president of the American Action Forum . In the past he was Director of the Congressional Budget Office, Washington’s top budget prognosticator, and he also served as the Chief Economist on the President’s Council of Economic Advisers. He will be releasing a new white paper discussing the impact the new health care law will have on small business.
• Bill Rys and Bob Graboyes of NFIB, James Gelfand of the Chamber, and Michael Ramlet of AAF. These policy analysts will discuss important provisions in the new health care law.
• Benefits advisor Tom Christina (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.) and two entrepreneurs, Joe Olivo (Perfect Printing, Inc.) and Eric Oppenheim (Burger King franchisee). This panel will discuss how the new law is affecting their businesses.

The Chamber, NFIB, and AAF will pull back the curtain on the new law, placing the spotlight directly on the entrepreneurs who will feel the financial and regulatory impact of the health care law – some of the people who constitute the nation’s real economic engine, who are the key to creating enterprise and lifting the U.S. out of the recession.

Click here to register for this free event (to be held at Chamber headquarters), or to view the webcast from anywhere.