Small Businesses Down on Outlook & Jobs Tax Credit

A national Index of Small Business Optimism lost 1.3 points in February, falling back to December’s level of 88 – out of 100 – and only 7 points higher than its lowest reading ever, according to the National Federation of Independent Business.

The lowest reading on the NFIB’s index was 80.1 in 1980.  “The persistence of index readings below 90 is unprecedented in survey history,” the NFIB said today in a statement.

The NFIB has opposed Obama Administration proposals to jump-start small businesses, including a plan to redirect money from the government’s bank bailout program to inject capital into local banks for lending purposes.

“News about the economy is, for the most part, improving and … is an unlikely source of small business uncertainty and declining optimism,” said Bill Dunkelberg, NFIB’s chief economist. “The Washington, D.C. agenda, on the other hand, remains a nightmare for small business owners and continues to be a real factor in small business owners not expecting business conditions to improve.”

The NFIB is also voicing discontent with a jobs tax credit proposal from the Obama Administration. The group said it would do little to increase employment.

Owners cannot pay workers more than the value they add to the firm, the NFIB said. For example, the group said that a small business owner cannot pay $40,000 for a worker to get a $5,000 tax credit — unless that worker can add at least $35,000 in revenue to cover the cost of hiring. 

Owners complain that poor sales are their top problem, the NFIB said.

February saw a significant shift in the average workforce reduction.   Employment on average fell a seasonally adjusted 0.13 workers per firm, down from more than 0.50 workers per firm every month for the previous fourteen months.

Ten percent of the owners increased employment by an average of 5.0 workers, while 19 percent reduced employment an average of 3.2 workers on seasonally adjusted figures.

“Net job creation will appear in the coming months, but the gains will be painfully slow with timid consumer spending, especially in the service sector,” said Dunkelberg.

The index results are based on a survey conducted February 28 that involved 799 small business owners.