Small Business Optimism Rises in August


Businesses are cautiously optimistic for the end of 2012.
(Image credit: Getty Images via @daylife)

In spite of a relatively weak jobs report for the month of August, U.S. businesses showed hope for the end of 2012.

August provided employers with a mixed bag of jobs news; spending and hiring gained during the month, as well as plans to create jobs. Investment plans remained slightly negative, with more owners looking to reduce investment and inventory levels.

Sales and earnings trends remained negative, spending continues to go down, hiring is weak and few companies are adding inventory.

Today, the National Federation of Independent Business (NFIB) released their August  Small Business Optimism Index.  The Index had some happy news, with a few positive signs.  The index—using a base of 100, set in 1986 numbers—climbed 1.7 points to 92.9 for August 2012.

This small increase is part of an upwards movement of several employment indicators; including the wish to invest and higher expectations for business conditions after the November 6 general election.

However, in spite of this encouraging report, few employers still think the current period is an opportune time for expansion.  In addition, uncertainty over government is taking its toll on the marketplace.

Doubt about the political climate has reached a record high for this business cycle, and small companies continue to be careful when it comes to growing their businesses.

Three takeaways from the Small Business Optimism Index:

  • Capital Expenditures:

The biggest news was a 6-point gain in those business owners who projected business conditions to recover in the next six months. Without seasonal adjustment, 14 percent of businesses surveyed expected improvement in business conditions, while 24 percent expect conditions to worsen.

  • Sales:

The trend in sales is that consumer spending had slowed in through mid-2012. Twenty percent of businesses say that poor sales are the top business problem, but that is down from 33 percent in December 2010.

  • Job Growth:

Small-business job growth saw a loss of .05 percent, the third negative month in a row. Job growth was essentially flat; the only jobs created were resulting from population growth. Seasonally adjusted, only 12 percent of owners reported an average of 2.7 workers added per firm over the past three months, and 10 percent reduced employment by an average of 2.5 percent. A majority of business owners—78 percent—made no net employment change.

Through all this, employers remain optimistic. Many look for an economic upswing occurring after the presidential election; anticipation is also building for the 2012 holiday shopping season.

Read the entire NFIB report here.

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