National Measure Of Business Optimism Slips | Could a double-dip recession be headed our way?
Photo/Brandon Butler
Kathryn Tsandikos says she maintains a sense of
optimism about the economy despite the pressure
of increased food costs.
Photo/Christina H. Davis
Karen DeMichele, Savvy Staffing Solutions.
According to the National Hot Dog & Sausage Council, hot dog season officially started on Memorial Day. But George’s Coney Island, the iconic Worcester hot dog stand, has not put out a “Help Wanted” sign.
Kathryn Tsandikos, a manager with the family-owned restaurant, said the business is giving its 10 to 12 employees more hours rather than bringing on more people.
“We try as long as we can not to go up in our prices, and the way to handle that is not to hire more people,” Tsandikos said.
Nationwide, many small businesses are thinking along the same lines, according to the National Federation of Independent Businesses (NFIB). The organization’s Index of Small Business Optimism fell 0.1 points in June, the fourth monthly decline in a row.
The index, which was set at a baseline of 100 when it started in 1986, fell from 94.5 in February to 90.8 in June. While that’s still much better than the recession low point of 81 that it hit in March 2009, it’s surely a bit of evidence that the economy could be headed for a second dip, rather than a smooth recovery.
Looking Ahead
Richard Kennedy, president and CEO of the Greater Worcester Chamber of Commerce, said he sees a number of possible signs of a double-dip recession, including the continued stagnation in the housing market and stubbornly high unemployment at the national level.
“I hear more talk about it these days than I did four or five months ago,” Kennedy said.
NFIB’s index is based on 10 factors covered in a monthly survey, including companies’ earnings, outlook for future expansion, inventories and access to credit.
Small employers’ outlook for the economy over the next six months fell particularly hard in June, to a seasonally adjusted level of negative-11. That’s a drop of six points since May and the lowest level since last July.
Hiring was a somewhat mixed bag in June. Employment levels bounced back a little from a reading of negative-one in May to positive three in June, and the ease of filling open positions fell slightly. On the other hand, actual employment over the past three months fell from negative-three to negative-seven.
At Savvy Staffing Solutions in Worcester, Karen DeMichele said she’s seen the demand for workers dipping recently after a strong first quarter, but she doesn’t foresee a serious drop in the economy.
DeMichele said there are obvious signs that businesses aren’t confident about the future. Her manufacturing clients, for example, ramp up production when they get an order, but don’t stay geared up in anticipation of continuing demand they way they did before the recession.
“It’s just not the way it happens anymore,” she said. “They’re conservative. They have to be.”
Still, DeMichele said she anticipates more hiring in the second half of the year.
Kai Rostcheck has seen small businesses’ decisions from two sides in recent months. He had been working as an independent marketing consultant in Medway before starting his own job search a few months ago, and was just recently hired by a small Eastern Massachusetts company that specializes in green buildings.
Rostcheck said he sees small businesses beginning to fill positions, but often with relatively inexperienced workers, or even interns.
“Salaries dropped significantly,” he said. “They’re willing to basically take people with less seniority, less experience and train them on their own time.”
Rostcheck said companies are also skittish about investing in themselves, paying only for things that offer the promise of immediate, certain returns.
“We kind of used to fly by the seat of our pants a little bit,” he said.
The NFIB measurement of the percent of businesses that made a capital investment over the past six months stood at 50 percent in June, the same as in May, and it hasn’t moved more than a percentage point up or down since January.
As for what makes businesses reluctant to invest, either in capital equipment or new employees, the problem picked as most important by the largest percentage of survey respondents was poor sales.
That was the biggest issue for 24 percent of the companies, down from 30 percent in June 2010. Taxes were the biggest problem for 20 percent, the same as last year.
While those problems may be abating somewhat, the survey found the fastest-growing headache for small businesses is inflation, cited as the biggest problem by 7 percent of respondents, compared to 4 percent in 2010.
That gibes with what Tsandikos has seen at George’s Coney Island.
“I know every time I look there’s always something that’s gone up every month,” she said. “Insurance is through the roof. The price of food, of course, keeps going up.”
She said the restaurant also tries to give its employees raises to help them keep up with their own rising cost of living.
Still, Tsandikos said she prefers to think that Massachusetts is just pulling out of recession slowly, rather than heading back downward.
“I’m kind of a positive person,” she said. “I think we all have to be optimistic.”
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