Research >> Economics
NFIB Small Business Optimism Index increased 1.9 points to 90.8
|
The NFIB Index of Small Business Optimism increased 1.9 points in February, to 90.8. While a nice improvement over the last several reports, the Index remains on par with the 2008 average and below the trough of the 1991-92 and 2001-02 recessions. The direction of February’s change is positive, but not indicative of a surge in confidence among small-business owners. Of the ten Index components, one fell, one remained unchanged and eight improved. Most notably, the gains in capital spending and inventory investment plans were large, but by historical standards the levels remain very low.
The President has crisscrossed the country telling us how many people will be hurt if he has to deprive them of his largess if spending is cut. And he has chosen cuts that will maximize the pain felt by the citizens, refusing the opportunity to actually lead and manage the cuts more sensibly. But he has nothing to say about the pain he inflicts on the producers of jobs that could help those who are unemployed and want to work. That pain is obvious on Main Street, most recently in the reports of the Regional Federal Reserve Banks. His programs are damaging the economy and creating more dependents on his largess while financed by those who make the economy run. He is clearly not in the mood to compromise much even though consumers are not happy with policy. It is not likely that higher taxes and higher energy costs will make them happy. Only 15 percent of consumers in the University of Michigan/Reuters February poll thought government is doing a “good” job, 43 percent a “poor” job. Seventy-six percent of NFIB owners think that business conditions will be the same (ugh!) or worse in six months - not a pretty picture.
The economy is clearly bifurcated, with S&P profits at record levels while GDP posts a growth rate of 0.1 percent (excluding government, growth would have been over 1 percent, still a lousy reading). The small business half of the economy is clearly languishing based on NFIB surveys of its 350,000 member firms. So, the average growth of these two sectors is the growth of the private economy (government excluded) and that’s not good. With some evidence that the large firms will not perform as well this year as last, prospects for strong growth this year are not good. Housing and energy will be bright spots for job creation, but can’t carry the whole burden of restoring employment to its 2007 level.
The labor market does seem to be finding better footing, although the indicators are not strong enough to produce the kind of job growth needed to expeditiously speed the unemployment rate to the Federal Reserve’s 6.5 percent target. February was a decent month for a change, especially for private sector jobs (the ones we want!), let’s hope for a repeat performance. But until owners’ forecast for the economy improves substantially, there will not be much of a boost to hiring and spending from the small business half of the economy.
Posted: March 12, 2013 Tuesday 07:30 AM