Big worries linger for 
many small businesses

Confidence falls to recession levels

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Tom Romola makes his living as a debt collector, a business in which one can prosper in bad times and good. But like many small-business owners these days, he says, the economy presents a particularly difficult challenge for the little guy.

“In my profession, there are people who are not going to pay their bills no matter what,” said Mr. Romola, who owns Alpine Credit Inc. in Colorado. “But when the economy is good, it’s easier to collect from those who would normally pay.”

Mr. Romola is not alone in his pessimism. In an economy still struggling to recover from the Great Recession, the nation’s biggest generators of jobs — small-business owners — are especially pessimistic about the months ahead, according to a survey released Tuesday by the National Federation of Independent Business. Confidence has shrunk to recession levels, NFIB officials said.

The group’s small-business optimism index rose 0.5 point last month to 88.0, but the December gain followed a 5.6-point plunge in November, which was one of the sharpest declines in the index’s 38-year history.

“Were it not for population growth supporting consumption and net new small-business creation, we would have no growth at all,” the report said.

‘Cliff’ repercussions

The latest monthly surveys were the lowest for the index since March 2010, when the U.S. economy was reeling from the Great Recession and after the peak holiday season. The confusion over the “fiscal cliff” and the lack of a clear direction from Washington on policy for the coming year didn’t help.

“Congress played chicken right up to the end of the year, leaving small-business owners with no new information about the economy’s future — no sense of how much their taxes would increase or if the economy would go over the now-infamous cliff,” said NFIB Chief Economist William C. Dunkelberg.

The fiscal cliff put a chokehold on the economy in December, said Mr. Dunkelberg, and many small employers — unlike economic forecasters — generally expect the economy to do worse for the foreseeable future. The NFIB survey, conducted in December, polled nearly 650 small businesses and NFIB members.

Pervasive uncertainty — over taxes, government spending and economic growth — is a key factor behind the small-business pessimism, said Leslie Levesque, a U.S. economist at IHS Global Insight.

“Skepticism about future business conditions is likely behind the reading,” she said. “It is still tough to tell how small-business owners will react in January since the resolution of the fiscal cliff. It is likely that many were not fully satisfied with the outcome.”

Small-business owners have been a persistent political sore spot for President Obama. Polls during the 2012 campaign showed he trailed Republican challenger Mitt Romney among small entrepreneurs by double-digit margins, although a late-October poll showed the gap closing to about 12 percentage points.

Many small-business owners made no secret of their unhappiness with the president’s “You didn’t build that” comment during a July campaign stop in Roanoke, Va., a remark heavily played up by Mr. Romney and other Republicans at their national convention in Tampa, Fla.

Hiring doubts

In December, 70 percent of owners polled by the NFIB said it was a bad time to hire or invest. Few added jobs during the month. Some 76 percent of the owners said they planned no changes in employment, 11 percent who were hiring added an average of 2.9 employees and 13 percent cut back by 1.9 workers.

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