WASHINGTON, May 12, 2009 –The National Federation of Independent Business Index of Small Business Optimism rebounded 5.8 points in April to 86.8 (1986=100), led higher by eight of the 10 Index components.And some commentary from the survey itself (NFIB):
“This is good news for GDP growth and a rescue of the job market,” said NFIB Chief Economist William Dunkelberg. “However, the report indicated no immediate turnabout as the improved numbers were still very low.”
The month’s real bounce was the soft indicators, the “feel good” portion of the survey. The outlook for general business conditions moved sharply higher, jumping by 24 points and leaving a majority judging that conditions would improve over the next three to six months. Expectations for gains in real sales increased 20 points, rising to a net-negative 11 percent expecting improvements—still negative but a solid move up from the March record low.
While small business owners think future prospects are brighter, the daily realities show deep problems remain. Employment, capital outlays, inventories, sales and earnings languish at historically low levels. [emphasis in original]
Most commentators compare our current situation to our experience in the 1980-82 period. There are similarities in the behavior of owner optimism, although the problems facing the economy were quite different (15 percent inflation, 21 percent prime rate, 17 percent mortgage rates, 10 percent unemployment rate). The Optimism Index peaked in 1976:2 at 103.2 and fell to the record low reading of 80.1 in 1980:2. This was a decline of 23 points in 16 quarters. Optimism peaked in the current expansion at 105.8 in 2004:3 (although virtually identical readings occurred in the prior two quarters) and fell 22 points to 84.1 in January this year. Both declines were about 20 percent in magnitude and over roughly the same period of time. In 13 quarters, the Index rebounded 28 points to 107.7 in 1983:3, signaling the start of the 1980s expansion. The April Index reading rebounded 5.8 points from March and is up 2.7 points from January. Perhaps this is the beginning of the end of the recession.