- The Washington Times - Tuesday, January 8, 2013

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.

Hiring plans for smaller employers also weakened, falling from 5 percent to 1 percent of employers.

One in 4 employers cited political uncertainty as a key reason why they were not expanding. They listed the top business problems in the way of hiring as taxes (23 percent) and regulations (21 percent). Poor sales came in third at 19 percent.

“December’s reading is certainly not typical during a recovery,” the NFIB said.

Sales showed some improvement but still weren’t a positive for small businesses: 18 percent of owners reported higher sales, compared with 30 percent reporting lower sales. That was a 5-point improvement from the previous month.

The appetite for loans for expansion also has failed to pick up for small businesses.

“Desire for new lines of credit is weak among small business owners,” the NFIB survey said. Fifty-two percent are not looking for loans, and 29 percent said their credit needs had been met.

But some businesses are doing well.

Gnome Games, based in Green Bay, Wis., was inversely affected by the fiscal cliff.

“Personally, I’m very optimistic,” Gnome Games CEO Pat Fuge said. “When people don’t take vacations, they escape with a board game or card game.”

At Kimmie Candy Co., sales have been growing 20 percent each year over the past few years, largely because of exports, which make up about 20 percent of the company’s business.

“People eat candy when they’re happy, and they eat candy when they’re depressed, and they give candy when they’re in love,” said Joseph Dutra, president and CEO of Kimmie Candy, based in Reno, Nev. “It’s an affordable treat that makes people feel good. So we’re kind of in the perfect business.”