by Calculated Risk on 7/12/2011 07:30:00 AM

From the National Federation of Independent Business (NFIB): Small Business Optimism Stagnates

NFIB’s monthly Small-Business Optimism Index dropped one tenth of a point (0.1) in June, settling at 90.8, an unsurprising reading, basically unchanged from the previous month and solidly in recession territory. While some indicators rose slightly – including expected capital outlays – pessimism about future business conditions and expected real sales gains tugged the Index down, causing a small but disappointing drop in the Index for the fourth consecutive month.
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Although June’s employment growth was weak, 15 percent (seasonally adjusted) of small firms reported unfilled job openings, a 3 point increase from May and an indication that the unemployment rate will ease back below 9 percent in the late summer or early fall.
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Inflation has slowed slightly, due in part to a leveling of gas prices.
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The sales outlook for small firms continues to look grim as expectations have declined for 4 months in a row and “poor sales” continues to be the #1 problem for owners in operating their business.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image in graph gallery.

The first graph shows the small business optimism index since 1986. The index decreased to 90.8 in June from 90.9 in May.

This index is still very low - and had been trending up - but optimism has declined for four consecutive months now.

The second graph shows the net hiring plans for the next three months.

Hiring plans increased in June and this is the highest level since February.

According to NFIB: “Although June’s employment growth was weak, 15 percent (seasonally adjusted) of small firms reported unfilled job openings, a 3 point increase and an indication that the unemployment rate will ease back below 9 percent in the coming months. "

Weak sales is still the top business problem with 24 percent of the owners reporting that weak sales continued to be their top business problem in June.

In good times, owners usually report taxes and regulation as their biggest problems.

There was some good news this month in the survey - employment plans are increasing, expected capital outlays are also increasing, and "poor sales" as the biggest problem is decreasing. However the recovery continues to be sluggish for this index, probably somewhat due to the high concentration of real estate related companies.