A new report suggests there may be a coming contraction as more small businesses plan to downsize their workforces than expand them.
May’s report by the National Federation of Independent Business, which regularly asks its membership of small businesses for their three-month outlook on hiring, forecast the worst prospects in eight months: the share of companies that planned to downsize was one percentage point higher than those that planned to expand.
This figure was negative for the first time since last September. “There was no significant job creation on ‘Main Street,’ at least among NFIB’s 350,000 member firms,” the report said. “… Over the next three months, 13 percent plan to increase employment and 8 percent plan to reduce their workforce, yielding a seasonally adjusted net negative 1 percent of owners planning to create new jobs, a very poor reading.”
While this net figure is still only “slightly negative,” according to the New York Times it’s a “fairly reliable indicator of hiring decisions [and] has been trending downward all year.”
“… And if the nation’s small companies plan to further delay hiring — or, worse, return to laying off workers, as they now hint they might — there is little hope that the nation’s 14 million idle workers will find gainful employment soon,” the Times reports.
For the third monthly decline in a row, the NFIB found small business optimism sunk 0.3 points in May to 90.9. That flagging optimism is likely due to the fact that one in four small-business owners saw weak sales, according to the report. “Also, inflation is a growing concern now with 1 in 10 citing this as their most serious business problem meaning cost side pressures coming in the “back door”, not rising food prices at home.”
Small businesses are "scraping by" while corporate profits are at a record high, said NFIB chief economist Bill Dunkelberg.