Hiring Is Up, So Why Isn't Optimism?

Small businesses hired more people in March than they have in a year, yet optimism dipped for the first time in months.
Business Writers
April 10, 2012

Small businesses hired more people this March than they have in a year, yet owners' optimism dipped for the first time in six months, says a new study.

The monthly report called the Optimism Index from the National Federation of Independent Business measures small business on 10 factors. These include hiring plans, sales expectations, current job openings and earning trends. Nine of these factors declined in March. (The only one that rose: owners reporting higher sales over the past three months. This factor rose 8 points or what the index terms a net 1 percent, the best reading since December 2007.)

Why the gloom? Even though the reports of hiring over the past few months are the best since February 2011, there was a decline by four percent of owners planning to increase the number of workers employed. This, the NFIB says, indicates growing weakness in the job market. Employers added to their payrolls less than half the monthly average increase in the prior three months.

“March came in like a lion, with Main Street seeing significant job growth, but it appears to have gone out like a lamb, and with no cheer in the forward-looking labor market indicators,” says NFIB Chief Economist Bill Dunkelberg.

“What could have been a trend in job growth is more likely a blip, and what looked like the start of a recovery in profits fizzled out," he adds. "The mood of owners is subdued. They just can’t seem to shake off the uncertainties out there. What we saw in March is painfully familiar. This was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself—and not in a good way.”

The report found the number of owners expecting business conditions to improve is eight percentage points below those expecting conditions to get worse over the next six months. Specifically, owners were gloomy about sales, profits and their chances of accessing credit.

Of the 757 respondents to the survey, nine percent cited inflation as their top problem. Reports of rising worker's compensation also are the highest since 2008.

The report did not sugar coat the findings. It says: "The March survey results were bad news, ending what promised to be steady, albeit glacially slow, improvements in the small business sector of the economy." Europe, it says, appeared to be waiting for the other shoe to drop. And healthcare is "in the Supreme Court, creating uncertainty either way the decision goes."

How are you feeling about your business prospects over the next six months?

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