12/17/2001
Small-business optimism made a sharp 3.1-point rebound in November, indicating that the small-business economy has stabilized from the Sept. 11 terrorist attacks. The data from November's Small Business Economic Trends (SBET) report indicates that America is still working its way out of the recession that began in March 2001, but that the shock of Sept. 11 is no longer the dominant factor in the state of the economy.
"The longest expansion in history is behind us, but it will take a little time for this economy to mount an assault on the next record," said NFIB Chief Economist Bill Dunkelberg. "The November survey is giving clear signals that the bottom has been reached -- hiring plans have strengthened, capital spending plans are headed up and even inventory investment plans are in the plus column."
Highlights of the survey include:
- Hiring plans were surprisingly strong for recession conditions with a net of 11 percent of small businesses expecting to create jobs. However, the number of firms reporting hard-to-fill job openings is at the lowest level since 1993.
- Four percent more firms lowered their selling prices than those who raised them. This is a six-point drop from October. The ten-year peak is 19 percent, reached in June 2000.
- More businesses planned future capital expenditures in November. Also, more reported actual capital spending in the last six months.
Taxes won the balloting for most important problem facing your business today with 25 percent of the vote. The second place finish went to the availability of qualified labor with 18 percent, closely followed by poor sales with 17 percent of the vote.
SALES: Reports of sales gains improved a point for the most recent three month period, rising to -5 percent. Unadjusted, 25 percent of all firms reported higher sales in the most recent three month period (unchanged), while 27 percent reported lower sales (unchanged). The net percent of firms expecting real sales volumes to rise in the next three to six months moved strongly into positive territory, rising 10 points to 6 percent of all firms.
EARNINGS: Seventeen percent reported that profits were rising (down 1 point), but 35 percent reported that earnings weakened (down 1 point). Seasonally adjusted, this represents a 1-point deterioration from the October reading. In retailing, the profit picture continues to improve slightly from dismal levels, with 39 percent reporting earnings deterioration (down 5 points), while 15 percent reported gains (unchanged).
PRICES: "Deflation?" Don't count on it. The net percent of firms reporting higher average selling prices fell to -4 percent of all firms. The frequency of planned price hikes was unchanged at a seasonally adjusted net 11 percent of all firms, the lowest reading since 1991. The pricing pressure, what little there is, remains in services and not in the "goods" and "distribution" industries.
EMPLOYMENT & COMPENSATION: Overall, small businesses shed an average of .3 workers per firm, seasonally adjusted. For the month, 13 percent of all firms reported increasing employment an average of 2.9 workers, and 16 percent reported reducing employment by an average of 4.4 employees per firm (seasonally adjusted). Twenty-three percent reported raising worker compensation over the past three months, down 3 points from October and 11 points below the record high reached just nine months ago in February, prior to the peak in payroll employment.
CREDIT CONDITIONS: The average interest rate paid on short-term loans fell 60 basis points to 7.6 percent, the lowest rate ever reported since the survey began tracking interest rates in 1980. Four percent reported that loans were harder to get while 3 percent reported that financing got easier.
INVENTORIES: Firms continued to sell off inventory, with the net percent of firms reporting inventory accumulation in November at -6 percent (seasonally adjusted), up 2 points from October. This follows readings of 1, 0, 1, 1, -2, -4, -2, -5, -1, -6 and -4 in the preceding 11 months--an increasingly impressive run of inventory reductions following months of virtually no inventory growth at all. Plans to add to inventories improved significantly, rising to 7 percent of all firms.
CAPITAL OUTLAYS: Capital spending plans gained 2 points to 29 percent of all firms, indicating that the sagging interest in capital expenditures may have hit bottom. Indeed, reports of actual outlays in the past six months rose 4 points to 67 percent of all firms, not a bad level at all, and inclusive of spending in September and October.
"This is going to be the mildest recession in post-war history," said Dunkelberg. "However, there is not enough growth in the numbers to keep the unemployment rate from rising above 6 percent. As reported in the June report, the recovery will be a `long L,' much like the 1990-91 recession that was followed by the `jobless recovery.'"
