"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Tuesday, June 14, 2011

NFIB Small Business Optimism Index

The NFIB is the National Federation of Independent Business, an organization that describes itself as "the leading small business association representing small and independent businesses.  A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington and all 50 state capitals."
One thing that the NFIB does is survey its members on a monthly basis, checking their feelings about current and future economic conditions.  Are small businesses optimistic about the future?  Are they planning on hiring?  Do they plan to expand?
Interestingly enough, this report gets pretty much no traction whatsoever from analysts[1].  So why am I giving the data on it?  Well, according to the US Small Business Administration, small businesses
  • Represent 99.7% of all employer firms
  • Employ just over half of all private sector employees
  • Pay 44% of total US private payroll
  • Have generated 64% of net new jobs over the past 15 years
  • Create more than half of thee nonfarm private gross domestic product
  • Hire 40% of high tech workers
  • Made up 97.3% of all identified exporters and produced 30.2% of the known export value in FY 2007
  • Produce 13 times more patents per employee than large patenting firms
So they've got some impact on and influence over the general health of the economy.
Now, with all that in mind, let's turn to the NFIB press release "Consumer Spending Remains Weak:  Small Business Optimism Dips a Little Lower".  May marks the third consecutive month of falling small business optimism, with the Small Business Optimism Index dropping 3 points to a level of 90.9.  Employment growth is virtually 0, with only 13% of the businesses surveyed planning to increase hiring in the next three months.  Overall sales have fallen 9% over the last three months.
Not a great economic picture, particularly in light of the impact small businesses have on the economy.
[1]  Which, in fairness, makes sense.  Small businesses are the least likely to be publically traded, and analysts look at publically traded companies.  But it still seems short-sighted, if you're interested in the health of the economy.

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