Barclays on how small business is not doing fine:
The National Federation of Independent Business (NFIB) index of US small business optimism fell to 91.4 in June, which was below the May level of 94.4 and the consensus expectation of 93.3.
These declines were broad-based, as all but one of the components declined from their May levels. Labor market signals were soft; the net percentage of respondents with plans to hire in the next three months fell to 3% (previous: 6%), but there was a slight increase in the net percentage who had hired in the last three months (to -3% from -5% previously).
There was continued evidence of skills mismatch, as 33% of firms reported few or no qualified applicants (previous: 37%) and 15% reported positions that they were not able to fill right now (previous: 20%). More broadly, this report suggested that while reductions in employment have stabilized, hiring has yet to catch up.
There was a significant deterioration in the economic outlook as well, with the net percentage of respondents who expected the economy to improve in the coming months falling to -10% (previous: -2%). This component alone accounted for 25% of the decline in the headline index and was in line with the weak employment report and ISM in June. Earnings trends were also substantially lower, with the net percentage of those expecting higher earnings falling to -22% (previous: -15%). This fall in earnings optimism was matched by an increase in the percentage of those citing poor sales as their single most important problem, to 23% (previous: 20%). This component has now overtaken taxes (21%) and government regulations and red tape (19%) as the most-cited issue for small businesses and is only slightly improved from the 24% who cited it as their largest problem this time last year.
The economy grew by 1.9% in the first quarter, probably a bit less in the second quarter. So a) there is nothing in this report that is surprising given such weak growth, and b) there is nothing in this report suggesting growth picked up in June.
Also, the folks at RDQ Economics make some good points:Also, though the percentage of firms citing “poor sales” as their single most important problem rose to 23% in June (this is down from a peak of 34% in early 2010), a larger combined percentage of 40% of firms cited either taxes or government requirements as their most important problem. This survey was conducted prior to the Supreme Court’s decision on Obamacare, an outcome the survey noted “was probably not what most owners expected, so “disappointment” over that will be reflected in the July survey responses” (the NFIB was one of the groups that challenged the constitutionality of Obamacare).