Is Slow the New Normal?

The latest National Federation of Independent Business Index of Small Business Optimism showed a gain of 1.6 points in May, with a reading of 92.2. While it is the best reading since September 2008’s 92.9 index, it does not indicate that we’re out of the woods. 

Drilling a little deeper into the numbers finds the following unhappy results:

  1. Employment: In May, companies still shed workers, with the average change in employment per firm at negative 0.5 workers, worse than the prior three months.
  2. Capital spending: The frequency of reported capital outlays over the past six months was unchanged at 46% of all firms.
  3. Sales and inventories: The net percent of all owners reporting higher nominal sales in the past three months improved four points to a net-negative 11%, 22 points better than a year ago, and up 14 points in the past two months. While it is the best reading since April 2008, the May reading indicates that more firms are still experiencing weakening sales trends than are enjoying sales improvements.
  4. Earnings: Not seasonally adjusted, 17% reported profits higher (up three points), but 49% reported profits falling (down two points).

After more than two years of economic challenges, small businesses are still struggling to hang on. Nothing that Washington has done thus far has provided any substantial help to small businesses and their plight. Still, many owners have grown accustomed to operating within a tough economic climate and are holding their own—slow is normal now.

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