Plans to hire at small businesses fell to record lows, according to a new report.
In November, 21 percent of small-business owners said they expected to reduce their staff over the next six months—the highest percentage recorded by the Wells Fargo/Gallup Small Business Index since it began counting in 2003. The last time the quarterly index was compiled—in July—just 10 percent of bosses said they planned to hand out pink slips.
Sixty-one percent of owners said they planned no change in their workforce size, and 17 percent said they would add jobs. That’s down from the 20 percent who said in July they planned to expand.
More than a quarter of small-business owners said they trimmed their ranks in the last 12 months, up from 21 percent who said the same in July. The number of bosses who said they’d cut back is at a two-year high.
Just 14 percent of bosses said they added jobs in the past year. The difference between the companies that planned to hire and those who planned to cut back resulted in a Gallup index score of -4. (A score of zero, of course, is equilibrium between those planning to fire and those planning to hire.)
Fiscal Cliff and Hurricane Sandy are to Blame
According to Gallup, the index tends to be positive—and it even reaches double digits in good economic years. The current negative number suggests “the potential for a serious decline in jobs early next year,” Gallup's chief economist Dennis Jacobe writes in the report. There is also a reduction in capital spending that is “consistent with a slowing economy.” The report fingered the looming “fiscal cliff,” Superstorm Sandy, and the recent election results for some of the blame for the pessimism.
Whatever the factors, the U.S. economy is weak and unemployment is high from a historical perspective.
“A further sharp increase in small-business layoffs, resulting in higher unemployment on top of the current economic conditions, could turn today's slow growing U.S. economy into something worse,” Jacobe warns.
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