Filed under: Management, Industry, Economic data, Small business, Federal Reserve
A recent report published by the National Federation of Independent Businesses (NFIB) gives indications that although American small businesses are certainly tightening their game plans a bit, they are by no means going down for the count. The report reviews a number of important indicators, testing everything from optimism to inventories. A casual read of the complete survey provided in PDF format, provides proof that while small businesses are actively adjusting to current economic trends, in many ways they’re simply applying some timely critical thinking within a “business as usual” format.
Some statistical highlights that I picked out from the report really gave me pause to wonder. For instance, 46% of the business owners responding reported that when attempting to hire new employees, they were faced with a lack of qualified applicants for the jobs they wished to fill. Overall the survey indicates that current and pending employment opportunities are steady to strong for 2008, while the available labor pool remains tight. We could speculate that depressed entry level wage scales have some bearing on this situation.
Though respondents indicated reduced expectations for economic improvement as compared to the September 2007 survey, capital outlays for buildings, land, vehicles, equipment, and fixtures remained firm. Even as small businesses expressed reduced expectations for sales increases moving through the year, they are still moving ahead with plans to increase capacities and improve facilities.
Overall, business inventories are being adjusted downwards, although not all respondents indicated declines. This is the continuation of a trend that began in mid 2007 and is not expected to reverse any time soon. Further proof of this is illustrated by the volume of freight moving by railroads.
Increases in employee compensation were reported by 23% of the survey respondents. A lesser percentage reported passing those increases on to the consumer. Of business owners reporting February gains in earnings over January, 60% cited stronger sales, 13% cited higher selling prices, and 7% cited lower material costs. It would appear that small businesses are doing what they can to help combat inflation.
Finally, the small business world doesn’t seem to be getting too overly excited about tightening credit availability. Only 3% of respondents cited credit cost and availability as their number one business problem. In contrast, in 1982 a record 37% of respondents indicated credit availability as troublesome. It would seem that at this point there is greater concern about the value of dollars in hand and generating the best return from dollars invested.
In conclusion, I would tend to say that American small business is taking current economic conditions in stride. Optimism is being held in check, and small business has seen no improvement in conditions based on moves made by the federal reserve. Inflation is seen as the number one concern for small business with insurance expenses following as a close number two. In many ways it would clearly appear that small business is tenaciously holding it’s ground while waiting for our government to figure some things out.
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