For small business owners, 2008 ended with a whimper. The National Federation of Independent Business Small Business Optimism Index fell 2.6 points to 85.2, the second lowest reading in the 35-year history of the survey.
Owners were hoping consumers would ride to the rescue, but that did not happen. “Unless there is a solid turnaround in January, we are in for a longer-than-usual recession,” said NFIB Chief Economist William Dunkelberg.
Here are some of the highlights (or should I say low-lights) of the last survey of small business owners for 2008:
Employment — Average employment per firm declined 0.86 workers (seasonally adjusted), the largest monthly decline in survey history. On the bright side, forty percent of owners hired or tried to hire (down three points from November), and 75 percent of those trying to hire reported few or no qualified applicants for the job openings they were trying to fill. Now the bad news – over the next three months, only 8 percent plan to create new jobs. However, this is still not the worst recession since the Great Depression, as so many in the media are claiming. There were lower employment readings in both the 1974-75 and the 1980-82 recession periods.
Capital Spending — Small business owners are deferring any project not essential to the survival of the firm.
“In this uncertain environment,” said Dunkelberg, “owners are postponing any capital projects that are not essential to the operation of the firm – or that they can’t afford or can’t finance.”
Inventories and Sales — Small business owners continued to liquidate inventories. The net percent of owners expecting gains in real sales volumes fell to a net-negative 18 points (down four points) seasonally adjusted.
Earnings — Profit gains deteriorated another four points to a negative 42 percent, a record low. A year ago, reports of positive profit trends were 22 points better!