Small Business Employment Fully in Recession Mode

NFIB's December survey of small-business owners is out, and let's get the bad news out of the way first: Yes, as Chad Moutray puts it, "the small business employment picture is weak." The number planning to add new employees is down to 6 percent, and the number planning to make cuts is up to 17 percent. Only previous survey readings in the 1974-5 and 1980-2 recession periods were worse when it comes to creating new jobs. Profit gains further "deteriorated" by three points. The number of businesses reporting loans harder to obtain hit the same high it hit last September.

But there are a few bits of good news we can find even in that mess. It could have been a whole lot worse given the most recent BLS report. The NFIB found the average decline in employment per firm to be not as bad as in September and October. That's not necessarily a sign that we've entered a slowing trend, but it's positive nonetheless. Capital spending outlays are still in recession mode, but they rose last month. The number of business owners planning to make capital expenditures increased 2 percentage points. Finally, overall optimism was up--by 0.3 points. And even that meager increase must be qualified--it's still the fourth lowest optimism reading in the survey's 35-year history.

What's to blame for all of this? Well, a year ago, the number one problem cited by business owners in the NFIB survey was taxes. Now, at a stunning 25 percent, the answer is low sales.