Small Business “Glimmers of Hope”?

In a couple weeks, we will release the next edition of our quarterly indicators for small business.  Much of that document will hinge on what we learn from the release of the first quarter 2009 real gross domestic product (GDP) figures, which will be released on April 29.  Given the severity of the recession, I would not expect for these numbers to be good.  The National Association of Business Economists (NABE) earlier this week released an industry survey showing that 93 percent of economists felt that real GDP would decline for the year as a whole.  With that said, the survey also suggests that declines in the economy are “abating.”  According to Sara Johnson of IHS Global Insight, “Key indicators — industry demand, employment, capital spending, and profitability — are still declining, but the breadth of the decline is narrowing.”

What does that mean for small businesses?  Over the past few weeks, we have seen some mixed surveys on the topic.   The April survey of small business owners from the National Federation of Independent Businesses continues to show a high degree of pessimism.  Its monthly optimism index is not far from its all-time low, set in 1980, and this has translated into anxiousness on the part of these owners to expand their business or (re)hire new workers.  In fact, their hiring intentions have become increasingly more negative since November, mirroring the decline in employment nationally.  We have lost 5.1 million jobs in the U.S. over the past fifteen months, and we can assume that a sizable portion of that was from small firms. 

Nonetheless, there are a couple surveys out which suggest that there might be some “glimmers of hope” over the course of this year.  Last month, the University of Maryland’s business school and Network Solutions introduced the Small Business Success Index.  According to its respondents, 67 percent were planning to invest in their businesses this year, bucking the recession; moreover, the small business owners in this survey tended to be more optimistic relative to the NFIB survey with nearly half suggesting that the economy will remain unchanged or improve in 2009.  This finding can also be found in the American Express Open Small Business Monitor, which finds that four out of ten entrepreneurs are both optimistic about the economy this year and feel that the economy provides opportunities for their businesses.  That is not to suggest that there have not been hardships.  Sizable portions of its respondents have had to take drastic steps such as instituting pay and hiring freezes and other ways of cutting costs. 

Nonetheless, despite the cautiousness in the down economy, there is also cautious optimism.  I was personally struck by this finding in the American Express survey.  There were 37 percent who said that the economy had presented them with opportunities.  Moreover, nearly “all of these glass-half-full entrepreneurs (92%) say that managing through the recession has made them a better business owner, compared to 77% overall.”  That is a pretty impressive finding, and one that suggests that even in tough times, entrepreneurs are able to adjust to make the current environment work for them.  That should give us all a “glimmer of hope” for our future.

Note: Only NABE members will be able to read the PDF version of its industry survey.