10/03/2001
NFIB Releases First Economic Statistics
The Main Street economy has become a casualty of the September 11 terrorist attacks, the NFIB Education Foundation revealed today. A special edition of its monthly Small Business Economic Trends (SBET) shows small-business optimism tumbling to its lowest point since 1993. This study constitutes the first statistical evidence of the economic shockwaves battering America's small businesses in the wake of the terrorist attacks. [Please download a copy of the report at the bottom of this release.]
August SBET data had indicated that small business was starting to recover from its spring and summer lull. Hiring plans and job openings were up substantially with optimism rising to a point that historically always preceded a pickup in economic growth. The New York and Pentagon attacks appear to have made small-business owners much more pessimistic about their economic future.
"Small-business owners seem to have taken the attack personally, with far fewer seeing hope for sales gains," said NFIB Chief Economist Bill Dunkelberg. "In these suddenly uncertain times, they have quickly concluded that customers will be holding on to their money." The expected real sales component has never gone negative since NFIB began conducting the SBET survey on a monthly basis in 1986. SBET was conducted quarterly from 1973 to 1986.
With sales prospects so poor, small-business owners are curtailing plans to hire workers and invest in capital spending. Each of these indicators was down sharply, sending the NFIB Small Business Optimism Index down over 7 points from August to the second half of September. Late September produced the lowest Index reading since 1993.
"This event has truly shaken the system, and only time will tell if that shock does long-term damage," said Dunkelberg. "Beneath the economic rubble is a solid foundation for economic recovery. Even after an 11-point decline, the percent of firms expecting better business conditions in six months was still above the January-July average for the year. The October report may shed light on whether consumers and entrepreneurs have since gotten over that initial shock and become comfortable enough to start doing business again."
Dunkelberg noted that NFIB's survey data is a far more reliable guide to America's economic health than stock market indicators. "Small-business owners see their customers face-to-face every day. They have a much better feel for the real economic forces at work across America," he said. "For example, the October 1987 stock market crash had no impact on the NFIB measures of small-business economic performance. This result lead to the correct prediction that the `Wall Street Event' would have no substantial impact on the real economy, contrary to the opinion of virtually all prognosticators at the time."
"The sharp drop in small-business optimism shows that the terrorists scored a direct hit on Main Street, not just Wall Street," Dunkelberg concluded.
Download the first SBET statistics that reflect data after the September 11 terrorist attack. (Adobe Acrobat Reader required.)
The NFIB Education Foundation's SBET survey has long been considered the definitive source of information on the small-business economy. The survey report includes a Small Business Optimism Index, which is a reliable leading indicator of economic activity in the general economy. For this special report, the September survey data was divided into two groups. Those whose questionnaire carried a postmark of September 11 and before constituted the "pre" group and those whose questionnaire was postmarked September 12 and after constituted the "post" group.
CONTACT: Michelle Dimarob, (202) 554-9000
