While last week I reported some optimistic news from the Global Entrepreneurship Monitor—small business starts are up dramatically, as are those entrepreneurs’ plans to create new jobs—November's Wells Fargo/Gallup Small Business Index survey paints a much more pessimistic picture of the year ahead and small business’s role in job creation.
Small-Business Owners Not Optimistic
After hitting a high of 23 in May, the Index dropped to -11 in November. This is the most pessimistic small-business owners have reported feeling since July 2010. (Note: During the pre-recession era, the Index typically hovered slightly above 100.)
Small-business owners' expectations for their businesses’ capital spending, financial situation and cash flow over the next 12 months all worsened significantly. One in three expect their business’s capital spending to decrease in the next 12 months. In addition, 30 percent expect “poor” cash flow during that time, and 28 percent believe they will be in a “poor” financial position a year from now. Both these figures are the highest they’ve been since Gallup began conducting this survey in 2003.
The hiring picture is particularly dismal. U.S. small-business owners in the survey report plans to add fewer net new jobs in the next 12 months than at any time since the depths of the recession. Net hiring intentions for the next 12 months dropped to -4—matching the record low of -4 in November 2008.
Gallup notes that in general, small-business owners’ net hiring intentions have typically been positive, with net hiring intentions in the double-digits during good economic times. In fact, as of July, net hiring intentions were in this range, at +10.
In addition, 21 percent of survey respondents report plans to cut jobs at their companies in the next 12 months—the highest percentage since the Index began. Just 17 percent plan to add jobs, down from 20 percent in the previous (July) Index.
At the recession’s height in early 2009, Gallup notes, equally low net hiring expectations were followed by massive layoffs. “While a repeat of that experience seems unlikely in 2013, there is the potential for a serious decline in jobs early next year if small-business owners' hiring intentions do not improve,” the authors warn.
The survey also asked small-business owners about their hiring over the past 12 months. Overall, net hiring has held steady for the past year, hovering around -11. This stagnation could help explain the pessimism small-business owners are now feeling about future hiring. But is this the only explanation? Whether it’s the aftereffects of Hurricane Sandy, worries about the looming “fiscal cliff” or residue from the election, it seems that at least some small-business owners still aren’t feeling confident enough to make hiring plans.
In past surveys, the majority of small-business owners have said they expect no change in hiring, and that held true in November, with 61 percent saying they had no plans to either cut or add workers in the coming year. Perhaps right now, holding steady is the best we can hope for.
Read more articles on small-business hiring.