Gallup conducts a quarterly survey that measures how small businesses feel about their present situation and what they're planning in the months ahead. Until 2008, the index scores were generally higher than 100. Now:
- One in five small-business owners (21%) expect the number of jobs at their company to decrease over the next 12 months, the highest percentage Gallup has measured to date.
- One in three owners (34%) expect their company's capital spending to decrease over the next 12 months -- the highest recorded since July 2010.
- Thirty percent of owners expect "poor" cash flow over the next 12 months -- the highest Gallup has measured to date.
- Twenty-eight percent of owners expect to be in a "poor" financial position 12 months from now -- the highest Gallup has measured to date.
This must be related to why so many of my friends and family are reporting that they're facing layoffs. I hate that this happens just before Christmas, too.
One of the more stunning aspects of the November survey results is the decline in small-business owners' optimism for the future. As entrepreneurs, small-business owners tend to be optimistic by nature, and relatively more optimistic about the future than the present. Given this context, owners' increasing pessimism toward their future not only reflects uncertainty, but also may imply a weakening economy going forward.
Owners' intent to reduce capital spending in the months ahead is consistent with a slowing economy. Small-business owners appear to be uncertain about their future operating environment, and uncertainty is a legitimate reason for them to hold back on new capital expenditures at this time.
Another troubling finding is the intention of 21% of small-business owners to reduce the number of jobs at their company over the next 12 months. This suggests the potential for a significantly higher unemployment rate in 2013 and all of the accompanying negatives that fewer jobs imply for the economy -- particularly given the importance of small-business hiring to the U.S. job market.
Overall, the Wells Fargo/Gallup Small Business Index survey results suggest the U.S. economy is extremely fragile -- and possibly susceptible to another recession. Policymakers need to keep this acute fragility in mind as Washington struggles to avert the "fiscal cliff."
I pray everyone at Ricochet is able to withstand the decline and provide for their families.