Hiring plans among US small firms plunge six points in September

09 October 2012 19:34  [Source: ICIS news]

WASHINGTON (ICIS)--Hiring plans among US small business owners fell sharply in September, a major sector survey said on Tuesday, and the outlook for the economy declined to another “recession-level” reading.

The National Federation of Independent Business (NFIB) said that its small business optimism index fell marginally by 0.1 point in September to a reading of 92.8 from 92.9 in August.

While the decline was small, the federation said it signalled yet another month of “recession-level” readings for the index.

“Since the commencement of NFIB’s monthly surveys in 1986, the index has been below 93 a total of 56 times,” the federation said, and “32 of which have occurred since the recovery began in June 2009.”

The index was at 94 or better in three months during the first half of this year but has been below the “recession-level” measure of 93 since June.

“September was another month of low expectations and pessimism for the small-business community,” the federation said, noting in particular that last month’s index was “pulled down by a deterioration in labour market indicators, with job creation plans plunging six points.”

NFIB chief economist William Dunkelberg said that small business owners are in “maintenance mode”, essentially avoiding taking actions or making decisions until they know the results of the US national elections on 6 November, which are just four weeks away.

“The election is essentially a horse race,” Dunkelberg said, “and its outcomes would have vastly divergent policy implications” for small business owners.

Democrat Barack Obama, who is seeking a second four-year term as president, is facing Republican former Massachusetts Governor Mitt Romney. In addition, all 435 seats in the US House of Representatives are up for re-election, as are about one-third of the Senate chairs.

“Everyone is waiting to see what happens,” said Dunkelberg, “especially small-business owners who have a lot at stake in the outcome – which could mean higher marginal tax rates and more deficits, or lower marginal tax rates and less government."

He said that uncertainty about the election outcome is second only to worries about the economy, “which is only keeping up with population growth”.

So, in the meantime, he said, “owners are in maintenance mode, spending only where necessary and not hiring, expanding or ordering more inventories until the future becomes more clear”.

In addition to the six-point drop in hiring plans, the NFIB survey showed a 3-point decline in plans for capital expenditures and marginal declines in inventories and job openings.

There was a four-point gain in the percentage of small business owners who expect the US economy to improve, but that rise only moved the rate up to positive territory with just 2% of owners expecting better economic times ahead.

The health of and prospects for small businesses are important because small firms – judged to be those with 500 or fewer employees – traditionally generate most new jobs in the US economy.

The NFIB represents some 350,000 US small businesses.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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