The National Federation of Independent Businesses recently came out with the latest edition (June 2009) of its Small Business Optimism Index (PDF) — and it’s a second month in a row of more positive optimism by small businesses. It’s an important development.
The NFIB chart that I have so often pointed to in past months showing an ugly downward trend, now has a decidedly upward trend in the line more recently. It’s much less painful to look at (see picture).
Here’s the money quote, by NFIB Chief Economist William C. Dunkelberg, and Policy Analyst Holly Wade, of the economic outlook for the economy for the rest of 2009 (bolding added by me):
“So far, the economy seems on the course outlined in our predictions last year. We expected a negative five percent in the first quarter (BEA reported -5.7 percent, second revision), negative two percent for the current quarter (some are now anticipating positive growth, but NFIB indicators do not show that much strength), one percent in the third and four percent in the fourth. The “adjustment” to expected economic decline was likely overdone, energized by proclamations of “depression” from Washington, the media, and employees of Wall Street firms. Psychology has played a very important role in this recession. Whatever the cause, people are realizing that we are not headed into depression so spending is picking up cautiously.”
So everything will just look rosy from this point onward, right? Not exactly.
Small business profits are still at record low levels, and it will take some time for that to change. Hiring has not picked up yet (usually hiring is a lagging indicator, so as an economic indicator that’s still to be expected at this point in the recession). Supply and demand is still out of whack with regard to the housing market, and will remain so for some time.
Remember, while it’s extremely difficult to predict the exact end of a recession, there are several positive signs here. Small business owner optimism is up and we may have seen, or will soon see, the bottom of the recession according to the NFIB report:
“Overall, owner optimism is up again, reinforcing the likelihood that April marked the bottom for pessimism and signaled the bottom of the recession. Stay tuned.”
