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Monday, August 30, 2010

Small business confidence “plummets” in July 2010…only 6% plan to hire

Discover Small Business Watch just came out with its July 2010 report. The results are pretty horrible, but not at all unexpected from our vantage point at SBE Council. “The Watch index dropped to 73.0 in August from 83.0 in July. August marks the third straight monthly decline in the index, which is the lowest it has been in 18 months on the 4-year-old index.”

The Watch reported that 75 percent of small business owners expected a second recession to occur before the country sees a full recovery. Other indicators found:

• 62 percent of small business owners rate the current state of the U.S. economy as poor, up from 58 percent, in July; while 28 percent it fair; 6 percent rate it good; and 3 percent rate it excellent.

• 55 percent of small business owners expect economic conditions for their businesses to get worse in the next six months, while 20 percent expect them to stay the same, and 21 percent think things will get better.

• Confidence was at a record low among small business owners who sell directly to consumers. Those small businesses slid 17.4 points since last month to a record-low 65.5 points on the index, compared to business-to-business operators who marked 79 on the index in August, down only 2.2 points from July.

• An indicator that dropped to its lowest point ever is that only 17 percent of small business owners said they would increase business development spending in the next six months, down from 28 percent in July; 52 percent said they would decrease spending, up from 45 percent in July; and 29 percent don't plan any changes.

• 53 percent of small business owners are experiencing cash flow issues, up from 47 percent in July; 43 percent said they are not; and 4 percent aren't sure.

• 62 percent of small business owners say the economy is getting worse, up from 57 percent last month; 24 percent see it getting better; and 12 percent said it's staying the same.

• On the job front, 78 percent of small businesses have no plans to do any hiring. When asked about hiring over the next few months, 72 percent of business owners had no plans to add or subtract jobs, 20 percent said they were laying off workers and 6 percent planned to do some hiring. The percentage of small business owners planning layoffs is the lowest in the history of the Watch.

Wait – let’s revisit that last bullet again – only 6 percent planned to do some hiring!

Unfortunately, the sentiment expressed by small business owners in July’s Watch will likely show up in the jobs data that will be released by the federal government later this week. Small businesses will not hire until they see that Washington puts an end to its hyperactive regulation and legislation that is driving (and threatens to drive) business costs higher.

I am in full agreement with the President when he says our nation’s economic crises will not be solved by a “silver bullet.” However, he needs to start shooting down some of the anti-growth and anti-business legislative and regulatory proposals that continue to move through the Congress and government agencies. He needs to back off his short-sighted approach in supporting tax increases on small business owners and entrepreneurs if he wants the private sector to begin investing and hiring again.

Karen Kerrigan, President & CEO

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