Small Businesses - Still Feeling the Pain

The WSJ details:

The National Federation of Independent Businesses said its Small Business Optimism Index dropped 3.2 points to 89.0 last month, more than erasing the modest 1.6-point gain it saw in May. The report, which was compiled by NFIB Chief Economist William Dunkelberg, described the decline as “a very disappointing outcome.”

In past periods following a recession, the NFIB index typically has risen back above 100 within a quarter or two of the trough in economic activity as measured by the National Bureau of Economic Research.

That hasn’t been the case during this recovery. The index hasn’t broken above 93 in any month since January 2008 when the economy was in the early stages of recession, even though the NBER is expected to eventually date the beginning of the recovery in the third quarter of last year.

In 23 of those past 30 months, readings have come in below 90, an unprecedented result in the survey’s history, the NFIB said.

Source: NFIB

Small Business Finally to Get Help?

To follow up on this morning's ADP release, here are some more details as to why this time (yet again) is different (i.e. worse).

Unlike during the 2001 recession when small business employment "hung in there" with less of a downturn than mid and larger firms (my guess is this was due to those individuals being laid off from larger firms, starting their own smaller firms) and led the recovery, small businesses have shed almost as many jobs as mid-sized firms and almost double large size firms.



Which is why it is nice to FINALLY see legislation targeting this area. Per the NY Times:

Senate Democratic leaders introduced their long-awaited small-business jobs bill on Tuesday — and in an indication of how urgently legislators viewed the matter, the Senate voted to begin debating the measure even before its details were finalized.

The bill, crafted jointly by the Senate’s finance and small-business committees, makes many temporary, and some permanent, changes to popular Small Business Administration programs that provide government guarantees for loans to small firms, including higher loan limits and higher guarantees.

Source: ADP

Small Biz Continuing to Struggle

While we've seen an improvement in sentiment among "big business", small businesses continue to struggle. The NFIB details:

The National Federation of Independent Business Index of Small Business Optimism lost 1.2 points in March, falling to 86.8. The persistence of index readings below 90 is unprecedented in survey history.

“The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Something isn’t sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy.”

The index has posted 18 consecutive monthly readings below 90. In March, nine of the 10 Index components fell or were unchanged from February’s not-so-great readings.

It appears worse when looking at all the areas of small business that continue to struggle...

Employment

After a devastating period of employment reductions, employment change per firm hit the “zero line” in March. Since July 2008, employment per firm fell steadily each quarter, logging the largest reductions in survey history (35 years). The February reduction of just 0.1 per firm indicated a substantial slowdown in the bleeding, and the March reading of 0.0 confirms that workforce reductions have ended.

Capital Spending

The frequency of reported capital outlays over the past six months fell two points to 45 percent of all firms, one point above the 35-year record low reached most recently in December 2009.

Sales

The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months improved 1 point to a net negative 25 percent. Widespread price cutting continued to contribute to reports of lower nominal sales.

Disinflation

The weak economy continued to put downward pressure on prices. Eleven percent of the owners reported raising average selling prices, but 29 percent reported average price reductions.

Earnings

In March, earnings trends declined with a net negative 43 percent of owners reporting positive profit trends.

Access to Credit

Regular NFIB borrowers (35 percent accessing capital markets at least once a quarter) continued to report difficulties in arranging credit.

Source: NFIB

Small Business Outlook Subdued

Marketwatch details (hat tip Calculated Risk)

An index measuring small-business optimism fell 1.3 points to 88.0 in February, erasing January's gain, according to a monthly survey released Tuesday by the National Association of Independent businesses. The index is far below its average, but has gained from 81.0 in March 2009, the second-lowest reading ever. Small businesses were cutting workers and prices in an effort to increase sales, the survey said. Fewer businesses reported problems getting credit, with 9% of firms saying they couldn't find the credit they need.

Source: NFIB