Don’t blame privately held businesses…
Privately held businesses are aggregately performing better now than at any point since the recession — sales are growing across the board, and profit margins are increasing, too. With such objective evidence of success, privately held businesses should be celebrating. Instead, they are cautious.
The National Federation of Independent Business reports the Small Business Optimism Index, a measure combining ten factors including plans to invest, planned hiring and expected economic expansion. For the month of June 2011, supposedly two years after we cleared the recession, the Optimism Index was “stagnant,” dropping from 90.9 in May to 90.8 in June. The small decline isn’t necessarily a bad omen, but a sign that business owners are being cautious. If you compare the current situation to February’s level (94.5) you can see their trepidation has been slowly building.
Small business represents 64 percent of net new jobs for the past 15 years, but — in spite of their profits and growth — small businesses haven’t been hiring lately, according to the still-elevated unemployment rate. There is too much uncertainty for employers to take on the long-term financial risk of new employees.
Five areas of uncertainty? The U.S. debt, healthcare policy, possible tax hikes, possible quantitative easing, and consumer spending. What is their impact? Read the full commentary here.