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Small business owners slightly optimistic in November

A November survey finds small business concerns about impact of taxes, regulations and health care costs

ATLANTA — Small business owners gained some optimism in November, but not much, according to a report Tuesday by the National Federation of Independent Businesses.

The federation found that small-business employment has improved, but hasn’t returned to hiring levels of 2007, when the big recession hit. Officials said that owners are concerned about a number of areas that could adversely impact their businesses, including higher taxes, new regulations and more expensive health care.

The survey of 762 randomly sampled NFIB member small businesses was conducted throughout the month of November. It found that the federation’s small-business optimism index was up only 0.9 point for a reading of 92.5.

Bill Dunkelberg, NFIB’s chief economist, said, “The year is not ending on a high note in the small-business sector of the economy. The ‘bifurcation’ continues with the stock market hitting record high levels, but the small-business sector showing little expansion beyond that driven by population growth.

“There is also a hint that employers are getting an inkling of what Obamacare might mean for labor costs; concern about the cost and availability of insurance bumped up 3 percentage points after a long period of no real change. Small-business owners who provide health insurance may soon find that their plans are ‘unacceptable’ to Obamacare and be obliged to either pay more for the coverage or abandon it and pay the benefit in cash. This will be a major source of angst and uncertainty in 2014.”

While state-specific data wasn’t available, Kyle Jackson, state director of NFIB/Georgia, said small-business owners in Georgia were as wary as those in oher states.

“November’s numbers should be a lot better,” Jackson said. “We’re still not back where we were before the recession, and there’s a lot of uncertainty among small-business owners over whether things are headed.”

A review of the November indicators in the report includes:

— Job creation: NFIB owners increased employment by an average of 0.05 workers per firm in November (seasonally adjusted), half the October figure, but positive. Seasonally adjusted, 14 percent of the owners (up 2 points) reported adding an average of 3.7 workers per firm over the past few months. Offsetting that, 12 percent reduced employment (up 3 points) an average of 3.4 workers, producing the seasonally adjusted gain. The remaining 74 percent of owners made no net change in employment. Fifty-one percent of the owners hired or tried to hire in the last three months and 44 percent reported few or no qualified applicants for open positions.

— Hard-to-fill job openings: Twenty-three percent of all owners reported job openings they could not fill in the current period (up 2 points), a positive signal for the unemployment rate and the highest reading since January 2008. Thirteen percent reported using temporary workers, down 2 points from October.

— Sales: The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months compared to the prior three months was unchanged at a negative 8 percent. Fifteen percent still cite weak sales as their top business problem. The net percent of owners expecting higher real sales volumes rose 1 point to 3 percent of all owners after falling 6 points in October (seasonally adjusted), a weak showing.

— Earnings and wages: Earnings trends deteriorated a bit in November, falling to a net negative 24 percent. The economy remains bifurcated, large firms doing fairly well, small businesses showing little growth or improvement. Three percent reported reduced worker compensation and 16 percent reported raising compensation, yielding a seasonally adjusted net 14 percent reporting higher worker compensation (down 2 points). A net seasonally adjusted 14 percent plan to raise compensation in the coming months, up 4 points. Overall, the compensation picture remained at the better end of experience in this recovery, but historically weak for periods of economic growth and recovery. With a net 14 percent raising compensation but a net 2 percent raising selling prices, profits will continue to be under pressure.

— Credit markets: Credit continues to be a non-issue for small employers, with just 4 percent of the owners reporting that all their credit needs were not met, down 2 points. Thirty-two percent reported all credit needs met, and 52 percent explicitly said they did not want a loan. Twenty-nine percent of all owners reported borrowing on a regular basis, up 1 point but a near-record low. The average rate paid on short maturity loans was steady at 5.4 percent

— Capital outlays: The frequency of reported capital outlays over the past six months fell 2 points to 55 percent, stuck in the “mid-50s” since recovering in 2012 from the lows of 45 reached in late 2009 and early 2010. The small business sector appears to still be in “maintenance mode,” with little expansion planned in the future. The percent of owners planning capital outlays in the next three to six months rose 1 point to 24 percent. Capital spending is at its highest point since early 2008, but has been well below normal levels for several years.