Small business optimism plunges, forecasting dire economic conditions ahead

The small business optimism index, calculated by the National Federation for Independent Business, dropped by more than five points in November, reaching one of its lowest points in history and highlighting concerns that the economic climate will worsen in 2013.

“Something bad happened in November,” the group’s chief economist, Bill Dunkelberg, said in a statement. “It wasn’t merely Hurricane Sandy.”

“The storm had a significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence.”

All components of the index — including capital investments, earning trends and expansion — declined in November, with the exception of planned employment increases, which went up.

“Nearly half of owners are now certain that things will be worse next year than they are now,” the statement continued. “Washington does not have the needs of small business in mind. Between the looming ‘fiscal cliff,’ the promise of higher health care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism.”

President Barack Obama’s signature health care law, Obamacare, has been cited by several major businesses as a source of rising costs and concerns. (RELATED: Autozone says Obamacare could have ‘significant’ negative impact on its bottom line)

“I feel a $40,000 reduction is the loss of one job, so if it’s a $200,000 tax increase, that’s five jobs,” one small business owner told the Star Tribune.

In a MarketWatch commentary, analyst Steve Goldstein said the decline in small-business optimism is staggering.

“The drop in expected business conditions fell only 18 points between September and October 2008 — as Lehman Brothers collapsed,” Goldstein said.

In November, that number dropped 37 percent.

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