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Expect Coal in Small Business Stockings

December 4, 2009 By: George Dooley

William C. Dunkelberg, chief economist for the National Federation of Independent Business (NFIB), the nation’s leading small business organization, issued a gloomy report on job creation by small businesses. The report  is based  on NFIB’s monthly economic survey that will be released on  December 8. The survey was conducted through November 30 and reflects 825 small business owner respondents who report that the largest impediment to new hiring is weak sales. "It now looks unlikely that job creation will cross the ‘0’ line by the end of the year," the NFIB said.

Small business owners in November reported a decline in average employment per firm of 0.58 workers (seasonally adjusted) during the prior three months, about the same as October’s loss of .52 jobs but down from a loss of 1.26 workers per firm in May.  Nine percent of the owners increased employment by an average of 2.3 workers per firm, but 21 percent reduced employment an average of 4.2 workers per firm (seasonally adjusted).

"The job generating machine is still in reverse as November’s report represents the 22nd consecutive month with more small business owners reporting employment declines than employment increases.  Sales are not picking up, so survival requires continuous attention to costs – and labor costs loom large," the NFIB said."

Eight percent (seasonally adjusted) of owners reported unfilled job openings, unchanged since August.  Over the next three months, 17 percent plan to reduce employment (up one point), and 7 percent plan to create new jobs (down two points), yielding a seasonally adjusted net negative 3 percent of owners planning to create new jobs, two points worse than October.  Still more firms are planning to cut jobs than planning to add.

“The largest impediment to new hiring is weak sales," the NFIB said, citing that, since January 2008, more owners have reported lower sales (quarter over quarter) in every month, mostly by double digit margins.  In November, 15 percent reported gains in sales, but 43 percent reported sales were still declining.

"The consumer is the key to job creation, when businesses have more customers, they will hire more workers," the NFIB said. "Workers must generate enough sales to pay their salaries, or the firm loses money.  Owners won’t pay $30,000 to get a tax credit of, say, $3,000.  But little has been done to stimulate the consumer and little is likely to be done, including mitigating the huge uncertainty consumers and owners face from the legislative ‘tax and tax’ agenda."


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