Small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months. The Optimism Index has fallen 13.6 points over the last two months, with nine of 10 Index components declining in April and one improving.
“This month’s optimism index proves that the toll from this pandemic and the stay-at-home orders across the country has had an intense and devastating impact on small business,” said NFIB State Director in Iowa, Matt Everson. “As we begin to lessen restrictions in Iowa, like today’s responsible announcement by Gov. Reynolds, which will put small business owners and their employees back to work and get Iowa’s economy rolling again, I’m hopeful we can return to record high growth and optimism in the future.”
Spotlighting small business owners’ need for more flexibility is that real sales expectations in the next six months declined 30 points to a net negative 42 percent, the lowest reading in the survey’s 46-year history. The second-lowest reading was net negative 24 percent in April 1980. A net negative 11 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 19 points from March.
The NFIB Uncertainty Index fell 17 points in March to 75, with most owners quite certain that the economy will weaken in the near-term. However, reports of expected better business conditions in the next six months increased 24 points, rebounding from a 17-point decline in March. Owners’ optimism about future conditions indicates they expect the recession to be short-lived.
In Cedar Rapids, Jerry Akers is one of those small business owners who expects the recession to be short lived. After an announcement of relaxed restrictions this afternoon from Gov. Kim Reynolds, Akers can re-open his Iowa and Nebraska Great Clips salons this Friday after being shut down for the last two months.
Akers has spent the past six weeks working towards re-opening not really knowing what that would look like. He took information from advisors across the Cosmetology industry on things like sanitation to what kinds of PPE he should purchase and stocked up on this like masks, toilet paper, sanitizing wipes and sprays and sneeze guards. He even has 100 gallons of hand sanitizer. All 17 of his hair salons have been wiped, cleaned, and sanitized from top to bottom and are ready to go for Friday’s re-open date. He’s also stayed in contact with his employees through Facetime chats and listened to their insight and concerns about coming back to work.
“I’m fairly optimistic about our business coming back from this pandemic! We know from other salons reopening in other states that there will be pent up demand for hair care services so we will plan on being buried the first 2-3 weeks. After that we believe that customers will relish getting back into a more normal routine and will find comfort in staying trimmed and looking great,” said Akers.
Other key findings from April’s Optimism Index included:
§ Earnings trends declined 14 points to a net negative 20 percent. Among owners reporting weaker profits, 39 percent blamed weak sales, 16 percent blamed usual seasonal change, six percent cited price changes, four percent cited labor costs, and two percent cited materials costs. For owners reporting higher profits, 63 percent credited sales volumes and 17 percent credited usual seasonal change.
§ The percent of owners thinking it’s a good time to expand lost 10 points falling to three percent, its lowest level since March 2010.
As reported in last week’s NFIB’s monthly jobs report, job creation plans fell eight points to a net one percent, the lowest level since December 2012. Three times as many owners reduced employment as reported an increase in their workforce. Forty-seven percent reported hiring or trying to hire (down seven points), but 41 percent (87 percent of those hiring or trying to hire) reported few or no “qualified” applicants for the positions they were trying to fill. Twenty-four percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 11 points.
“The full force of the “recession” has not yet been felt as programs such as PPP encourage firms to maintain employment even as the government shutdown reduces business activity,” said NFIB’s Chief Economist William Dunkelberg. “A large percentage of the unemployed expect to be rehired as the economy opens back up, but the picture is further confused by unemployment benefits that for many exceed previous pay. Small business owners are starting to rehire laid-off employees as states lift business restrictions and small business loans are hitting bank accounts.”