Near Future Not Looking Good from the Perspective of Small Business Owners

The NFIB released its October survey of small business owners and the mood is… well, shall we say less that upbeat.
“Things were looking good until September 18 when the Fed warned that the economy was sinking,” said NFIB Chief Economist William Dunkelberg. “The logical response of small-business owners was to cut hiring, capital spending and other growth-related activities.”
Owners did try to hire and fill needed positions in October, but with little success. Fourteen percent reported increasing employment an average of 2.9 workers per firm compared to 11 percent who reported workforce reductions averaging 4.2 workers, an average decrease of about 0.1 employees per firm.
Things seem a little worse for jobs in the construction industry, with 11 percent reporting that they increased the size of their workforce, while 16 percent cut employment. Although it was not all bad news in construction, where there are signs of some firming of demand. In July of 2006, a net 40 percent of the construction firms were raising prices, compared to a net 1 percent reporting higher prices in September 2007. Now, more firms are raising prices, indicating stronger support from non-residential construction and home additions and repairs.
With entrepreneurs being the job engine in this economy, this is not good news for the near future.
Twenty-two percent reported unfilled job openings, down three points from September. Over the next three months, 15 percent plan to create new jobs (down three points), and 10 percent plan workforce reductions (up one point), yielding a seasonally adjusted net 11 percent of owners planning to create new jobs — down three points.
“Jobs disappear when owners don’t expect sales to grow,” Dunkelberg said. Fourteen percent of the owners reported that the availability of qualified labor was their top business problem, down three points from September.
And now for the news that put a chill down my spine. The net percent of owners reporting higher average selling prices rose six points to 15 percent of all firms. Plans to raise prices also gained a point to 22 percent of all owners.
“The Fed may be preoccupied with recession but small-business owners’ reports of price hikes suggest that inflation can’t be dismissed,” said Dunkelberg. “The historic relationship between inflation and the percent of owners reporting higher prices suggests that inflation will be showing some new, unwanted, vitality.”
Indeed! And in case you missed my caution about inflation, read this…..