The National Federation of Independent Business (NFIB) released its monthly Small Business Economic Trends (SBET) survey, and the outlook for small businesses is still not good.  The NFIB counts its membership at about 350,000 small businesses.

The overall Optimism Index declined in the month of March to 86.8, roughly the same level it was at the very tail end of 2008 (87.8 in November ’08, when the world was on the brink of collapse):


NFIB Optimism Index

click for larger chart

NFIB’s economist, William Dunkelberg, commented as follows:

While news about the economy has been positive for two or three quarters, small business owners remain quite pessimistic about the future for the economy. The Optimism Index has been below 90 for 18 consecutive months and below 90 in all but four months since the recession started in January of 2008. [...]

Since small firms produce half the private sector GDP, it is hard to envision a sustained recovery without their participation. Once the gains from inventory rebuilding are exhausted, it is hard to see what will fuel growth. Small firm capital spending is at 35 year low levels and plans for future expenditures are equally low. Plus, hiring plans remain “negative” as more firms still plan reductions than increases in their employment).

Unfortunately for small businesses, their larger counterparts enjoy (at least) three distinct benefits that they don’t:

  1. International sales
  2. Stronger balance sheets
  3. Easier access to credit

Small businesses overwhelmingly continue to cite “Poor Sales” as their number one problem:


Small Business Sales Remain Weak

click for larger chart

I agree with Dunkelberg:  Barring a turnaround for the nation’s small businesses, it’s hard to see how this “recovery” will have much sustainability or make a dent in the ~8.4 million jobs we’ve lost since the recession began.  The problem, I believe, is how to stoke final demand (hence the “Poor Sales” problem), without which not much progress can be made.

Category: Data Analysis, Economy, Markets, Psychology, Research

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to ““Recovery” Bypassing Small Businesses”

  1. beaufou says:

    “The problem, I believe, is how to stoke final demand (hence the “Poor Sales” problem), without which not much progress can be made.”

    Even that may not be enough.
    Remember this one?

    Last year was bad, this year looks atrocious.

  2. Mannwich says:

    Small businesses obviously don’t matter in the Potemkin economy. Unless they’re publicly traded stocks, they’re invisible to the Fed and powers-that-be.

    They’re the only entities now competing in a quasi-”free market/capitalist” environment. And they’re not “where the money is”, so our politicians couldn’t care less.

  3. Ted Kavadas says:

    Thanks for this post and the charts. I believe these NFIB numbers, and the accompanying economic situation, are highly significant.

    The entire press release is worth reading. One item that stood out is the following quote, “Widespread price cutting continued to contribute to reports of lower nominal sales.”

    Of course, lower revenues and lower profitability are not a good combination.

    The persistence of poor (or in many cases no) revenue growth among both these smaller firms as well as larger ones is a very significant, and overlooked, situation…

  4. beaufou says:

    This is also interesting as far as job creation is concerned.
    Manny is right, small business—no lobbies—no one gives a shit in Washington.
    They’re wrong though.

  5. sparrowsfall says:

    Just to point out that this same survey has been telling us for months, for years in fact, that a shortage of credit is the *very last thing* on small businesses’ list of constraints.

    If lending is down, it’s because businesses aren’t asking for loans. From the press release:

    “Two percent characterized the current period as a good time to expand facilities”

    “89 percent of the owners reported all their credit needs met or they did not want to borrow. ”

    The “credit crunch” is a Wall Street-promulgated myth — there are oceans of cash out there looking for truly productive investments, and turning to gambling in frustration — one that I wish Big Picture would do more to puncture.

  6. PrahaPartizan says:

    Why should anyone be surprised by this? Small business really falls into two categories – either construction contractors or sub-component manufacturers. Construction across the board – residential and commercial – is in the tank and won’t be coming back soon. So, all of those folks who worked on houses or office buildings are scrounging for work of any sort. The sub-component manufacturers used to produce the myriad parts employed in the production of things, like cars and household appliances. Anybody who used to make auto interior components, the specialty parts used in the engines and drive-trains, the electrical and mechanical systems used in appliances are huffing vacuum right now. Worse, since the multi-national corporations who used to contract with them have shifted their supplier stream to somewhere in Asia, these small firms will never recover before the currency adjustments necessary to allow their survival occur because of geopolitical concerns.

  7. Lugnut says:

    Who on Obama’s advisory team has had any practical work experience outside of the public sector?

    Similar to the old proverb of asking the blind man to describe an elephant merely through touch, your asking a group of individuals to revitalize a small business sector from which they have had no exposure to and that they have little idea of how it operates. Forecast: rough seas ahead.

  8. batmando says:

    re credit –
    “the net percentage of companies expecting credit conditions to get easier in the next 6 months fell back to previous lows”
    from “Small Business IS a Big Deal”
    (hattip: ms. karen)

  9. scharfy says:


    exactly. exactly. exactly.

    Much of the current (and former) economic advisory teams in America seem to treat small business as invisible.

    Its because tanning salons, independent contractors, restaurants, et al – don’t have lobbyists. That’s only for big business and big labor.

  10. lalaland says:

    I think half the gains of large corporations are simple accounting shifts/tricks. Those of us who can’t play with monopoly money are down and not getting better quickly, for sure.

  11. VennData says:

    They don’t sell things people want.

  12. HarryWanger says:

    As I posted yesterday:

    From Fed Lacker:

    “Tight credit often gets the blame for holding back small-business expansion these days, but according to a recent survey by the National Federation of Independent Business, weak sales are by far the No. 1 problem facing small businesses,” Lacker said.

    As I’ve been saying, our business had its worst March in nine years. Also, as I’ve been saying, all the other small business owners I meet/work with said the same. I was called out for posting that so at least we’re seeing some confirmation that I’m not completely insane.

    Maybe the big retailers are seeing gains but us little guys out here are struggling. We simply don’t have the pricing power to slash as they do.

    And yes, VennData, we do sell things people wan.

  13. Invictus says:


    Out of curiousity, a couple of questions:

    Are you an NFIB member? Have you ever participated in the monthly survey?
    What sort of small business do you own, and how many employees do you have?

    I’m fascinated by the small company/large company decoupling we’re seeing, and would love to hear first hand from a small business owner as to what s/he’s seeing out there.

  14. wally says:

    So… no small business growth, no homebuilding, no job increases and declining state sales collections and yet we are in a recovery?

  15. Casual Observer says:

    We simply don’t have the pricing power to slash as they do.

    I think the trade deficit numbers would confirm that. Overall the consumer is buying cheaper. Not that surprising given that many consumers are still tapped out. I think if you are a small business focusing on the top 1-2% of wealth holders in the country, you are likely doing just fine. Everyone else is thinking “cheaper”. This credit bust will still mark a huge secular shift in consumer attitudes.

  16. The Curmudgeon says:

    When big labor and big banks and big mortgage financiers and big insurers are too big to fail, all the rest are too small to succeed.

    Tag this another huge cost of the bailouts, that, like the twin military deployments, are incalculably expensive, in a way that numbers on a balance sheet can never capture.

  17. Will Up North says:

    @ Invictus

    Long time reader here and I’m happy to share some general info about my company. We are a small manufacturing company in the upper midwest. We are neither a construction contractor or a “sub-component” manufacturer. We make a variety of products and sell them directly to consumers – only 5% of our volume is B to B. Our average retail price for a single item is under $50

    I sent out 71 W-2′s for 2009. The majority of our employees are seasonal – typically working 3-5 months over the course of a calendar year.

    Yes, we belong to NFIB and yes, I participate in their surveys.

    We do all our banking with a local bank (always have). Their lending standards never changed during the craziness and still didn’t after the crash. We have never had problems gaining access to credit.

    We have seen pressure on our top line. It seems clear to me that the near 10% unemployment rate drives this in our customer base. Having said that, our sales growth for 2009 was 17%. This is down from 50%+ in 2008 and an average of over 40% per year since 2002. I would disagree with the commenter above that says we as small businesses don’t make anything people want. I would agree with another that our ability to manipulate pricing is very limited.

    The final note I would make is that we have seen a doubling in our bad debts from customers. Thankfully, we still have a very good bad debt % but doubling ain’t good no matter where you sit. I attribute this to unemployment again – plus more restricted credit to consumers in general.

  18. Invictus says:


    Thanks for the commentary. If I were to comment on just one thing, it would be the fact that you managed to continue growing your company through 2008 and 2009. That in itself is remarkable.

    I also happen to agree with you that a) Small businesses do make things that people want and, b) Pricing power for smaller businesses is slim to none.

  19. Mark Down says:

    TIF on 4/14/09 23a share today 51 ….where is the sky failing?

  20. alfred e says:

    The missing info is that “big American” companies are posting results based on global business.

    Split it out into US versus off-shore for globals and the results will probably look quit similar for on-shore.

    Also, big companies have a much lower cost of capital. They can sell stock instead of borrow.

  21. beaufou says:

    You’re right, We don’t swap derivatives or create money out of our arses and “offer” credit to our clients.