From the latest NFIB Small Business optimism survey, we’re still need seeing much in the way of jobs carnage…
Last month, 12 per cent (seasonally adjusted) of the owners added jobs, but 14 per cent reduced employment, leaving us with a net negative 2 per cent of firms adding jobs in July. The remaining 74 per cent of owners made no net change in employment, suggesting that firms are holding steady but not planning to grow any time soon. While an improvement from June, job creation still remains solidly negative. Twelve per cent (seasonally adjusted) reported unfilled job openings, a disappointing 3 point decline from June. Over the next three months, 10 per cent plan to increase employment (down 1 point), and 11 per cent plan to reduce their workforce (up 4 points), yielding a seasonally adjusted net 2 per cent of owners planning to create new jobs, down 1 point from June. The poor recovery in the jobs numbers is a result of very low housing starts activity and lagging expenditures on ‘services’, both labour intensive industries dominated by small firms. Housing starts show little hope for much job creation in construction in the near future and the most recent reports on consumer spending show continued weakness, with retail sales falling. Without sales, there is little reason to expand. And with Washington politics being as they are, there is plenty of reason to remain uncertain.
Meanwhile, headline optimism is looking bad:
For the fifth consecutive month, NFIB’s monthly Small-Business Optimism Index fell, dropping 0.9 points in July—a larger decline than in each of the previous three months—and bringing the Index down to a disappointing 89.9. This is below the average Index reading of 90.2 for the last two-year recovery period. Expectations for future real sales growth and improved business conditions were the major contributors to the decline in optimism. With the repercussions of the debt compromise yet unknown, next month’s report will provide a more complete picture of the reaction on Main Street.