Wall Street is more confident for the moment but it’s not translating to Main Street. A small-business confidence survey fell in May for the third month in a row. The poll, by the National Federation of Independent Business shows optimism better than in the depths of the Great Recession, but still lower than at any other time since the survey began in 1986.
One in four owners surveyed cited weak sales as a chief concern. One in ten listed inflation. The average change in employment was essentially flat. Even though interests rates are low, capital spending is at a historic low. Also, a mere 5 percent of the small-business owners said this was a good time to expand: 71 percent of these worried about the weak economy, 14 percent about political uncertainty.
The NFIB leans conservative in its advocacy, so not surprisingly its economist Bill Dunkelberg cites “the growing debt, large deficits, threats of higher taxes, regulations being spewed out by state and local administrations, and the uncertainty of the new health care law” as key drivers behind the pessimism.
Point taken. But the larger reasons for concern among many small businesses can’t be put in a neat ideological box. If government were drowned in the bathtub tomorrow, as anti-tax crusader Grover Norquist wishes, the economy would still face real unemployment of more than 16 percent, the ongoing pain of the housing bust, flat or falling wages, vast amounts of private debt yet to be unwound and lack of lending. On top of that, the fading stimulus and state and local government cuts are adding to, not easing, the drag on recovery.
Ideology aside, small business remains at huge risk from the slowing economy. Many just made it through the Great Recession. They’re on the knife’s edge.
Today’s Econ Haiku:
The China bubble
For Red Capitalism
A cause for the blues