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Small business still down

Small businesses still searching for the elusive recovery.

Written by Agencies | Washington |
April 14, 2010 6:05:03 pm

The talk of the global economic recovery has been going on for the last one year almost,but don’t ask for the opinion of these businessmen.

Small businesses in the U.S. are still waiting for the economic rebound that’s enabled larger companies to obtain low-interest credit and to boost exports and production in recent months.

Smaller companies aren’t much more optimistic than they were in the depths of the recession,according to a survey released Tuesday by the National Federation of Independent Business.

That pessimism is slowing job creation and likely weakening the recovery,economists say.

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The NFIB’s small business optimism index fell 1.2 points to 86.8 in March,the lowest level since July 2009. That’s a sharp contrast with other surveys showing larger companies rebounding.

“The March reading is very low and headed in the wrong direction,” said William Dunkelberg,chief economist at the NFIB.

“Something isn’t sitting well with small business owners.” Small businesses account for about half of gross domestic product. Firms with fewer than 50 employees historically have created about one-third of new jobs,according to Scott Brown,chief economist at Raymond James.

The NFIB’s index has been below 90 for 18 straight months,the longest sub-90 period since the survey began in 1973. It fell below 90 for only one three-month period in the steep 1981-82 recession.

Small businesses cite weak sales and uncertainty about the economic recovery as their leading concerns. Obtaining loans also remains difficult for many NFIB members. Fifteen percent said credit was harder to get than the last time they sought loans,the NFIB said,up from 12 percent in February.

On a more positive note,many small companies appear to have stopped laying off workers. The NFIB’s members reported no change in employment in March,after shedding workers every month since July 2008.

But with sales and earnings weak,few are ready to hire. Over the next three months,slightly more said they planned to cut workers than add jobs,on a seasonally adjusted basis.

Roger Gerick,owner of Freightmovers in Tyler,Texas,with around 300 people on the payroll,doesn’t expect to hire in coming months.

Business hasn’t picked up enough to warrant it,he said. “Politicians say the economy is recovering,but my sales people can’t find it,” he said. “They just can’t find this expansion.”

During the lean times of the recession,Gerick says his company managed to survive by pursuing new work,such as hauling kitty litter,raw materials and used medical equipment.

The Institute of Supply Management,a trade group of purchasing executives at large companies,said earlier this month that surveys showed both the manufacturing and service sectors are expanding at a healthy clip.

“The recovery might not be quite as impressive as those ISM indices currently suggest,” said Paul Ashworth,senior U.S. economist at Capital Economics. “The truth … is probably somewhere between” the ISM and NFIB surveys.

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