I don’t like to wring my hands too much over one set of economic data.
The $15 trillion U.S. economy is far too complex to fixate on only one aspect of it. The direction of employment, or rather unemployment, gets and deserves a lot of attention, but it’s not the only thing that matters when it comes to economic health.
While I’m inclined to view Friday’s announcement that the economy created more than 200,000 jobs for the third straight month as very positive, it wasn’t the blowout statistic that I think forecasters have been rooting for.
The economic recovery may be 22 months old, but I’m impatient for the business mood to switch to risk-taking from risk-forsaking. Sure, mergers-and-acquisitions activity seems to have picked up at the Fortune 500 level. That’s cold comfort to small businesses that are simply looking for their sales to pick up.
Small business is a big deal for the U.S. economy, with half of all Americans working for a business with fewer than 500 employees. On Tuesday, the National Federation of Independent Business said its monthly Small Business Optimism Index fell 0.7 points for April after a March decline of 2.6 points. The Washington trade group described the recovery of the small-business indicators it tracks as “especially anemic” compared with the aftermath of the 1980-82 recession.
Chris G. Christopher Jr., senior principal economist for IHS Global Insight, noted that the net percentage of small firms that said they intended to hire has stagnated at 2 percent. “Not a very robust number,” he said in a note.
We may like to think of economic recoveries as being like rising tides lifting all boats, but the captains’ comfort levels depend on what shape their boats are in. Because small businesses are much more exposed to construction and consumer spending, they are feeling the deleterious effects of a post-bubble housing market and household budgets being stretched by higher energy and food prices.
The NFIB survey isn’t the only small-business indicator flashing “caution.” Last week, the Institute for Supply Management’s nonmanufacturing index fell for the second month in a row - not a good sign for the services sector that dominates the U.S. economy and the small-business world.
Glenview, Ill.-based SurePayroll Inc., an online payroll processor, said that April was the seventh consecutive month of flat or shrinking hiring by its small-business customers nationwide.
MultiFunding L.L.C., of Broad Axe, surveyed 250 small businesses that were looking for financing recently and found that only 10 percent of them would be eligible for conventional loans through banks. “So many people’s collateral has self-destructed,” said Ami Kassar, CEO of the business loan broker.
Good thing other surveys, such as one by the Federal Reserve of banks’ senior loan officers, show weak demand for loans by small businesses. Of course, part of the reason demand is weak is because business owners are reluctant to apply for loans for fear they’ll get turned down.
All these reports seem to leave many small-business owners where they’ve been for months: waiting for their monthly sales to pick up. Until they do, those “Help Wanted” signs will stay out of the front window.