Should Small Businesses Have Faith in the U.S. Economy?
Posted by Dave Thomas on September 23, 2011 in Business Financing, Business Management, Business News [ 1 Comment ]
As investors and business owners continue to look at the U.S. economy, they view it as shaky at best. In fact, shaky might be too kind a term to describe an economy that is just steps away from another recession.
In retrospect, Thursday could have been even worse, as the Dow dropped as much as 527 points, the second consecutive rout in the stock market since the Federal Reserve reported a change in strategy for battling the economic slowdown. The To date, the Dow has dropped more than 15 percent in two months, since traders started focusing on recession fears and the market was embroiled in volatility.
“Markets rely on confidence and certainty. Right now there is neither,” John Canally, an economic strategist at LPL Financial, an investment firm in Boston, told Reuters.
On Thursday, investors purchased American government debt, which they view as less risky than stocks as the nation deals with its long-term budget.
Small Businesses Not Confident
The Fed, in an effort to slow the meltdown among investors, reports it will move $400 billion of its own holdings in hopes of reducing interest rates on long-term loans.
As the central bank sees things, allowing individuals and businesses to borrow money more cheaply will spur them to spend it throughout the economy, offering a lift that could slow the bleeding.
Small businesses, meantime, have not shown much excitement about flooding the market with new employees, yet another sign that the U.S. economy is on shaky ground at best.
According to a summer survey from the online payroll service SurePayroll, the percentage of small business owners expressing optimism about the nation’s economy dropped from 67 percent in June to only 47 percent in July. While companies are not laying people off like they were during the most recent recession, they’re also not hiring people in droves, a sign that they are extremely cautious regarding this economy.
A spokesman from the Bureau of Labor Statistics notes that employers nationwide have to create some 130,000 jobs per month just to stay even with population growth and hold the line on unemployment, which currently sits at around 9.1 percent.
What’s the Solution?
Earlier this month, President Obama announced a tax credit for small business owners as an incentive to spur them on to hire more workers. The plan would pay up to $4,000 to small businesses who hire an individual who has been out of work for a minimum of six months.
A survey (7,500 small business owners) from the Pepperdine Private Capital Markets Project indicates that economic uncertainty (38.2%), access to capital (26%), and government regulations and taxes (24.2%) are the leading reasons small businesses are hesitant to hire.
If Thursday’s stock market slide was any indication, not only are many investors feeling uncertain, but a large number of small business owners are right there with them on the ship.
For everyone’s sake, hopefully it isn’t called the SS Titanic.
Photo credits: thedigeratilife.com and blogs.cantonrep.com