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Tags: Small | US | Firms | hiring

Small US Firms Lower Hiring Expectations

Monday, 02 July 2012 11:42 AM EDT

U.S. small businesses have lowered their hiring expectations as their confidence in the economy has fallen into another mid-year slump, a new survey showed on Monday.

Vistage International, which represents small business owners, said its confidence index fell to 92.8 in the second quarter from 105.1 in the first three months of 2012, which had been its highest level in a year.

For a third year running, the index showed confidence suffering a mid-year fall on the back of a weakening recovery and concern about economic policies.

The proportion of executives who expected the economy to improve over the year fell sharply to 30 percent, down 19 percentage points.

Views on the economy among small firms were more volatile than its underlying performance, Vistage said in a statement, reflecting uncertainty about growth and "the potential direction of economic and healthcare policies."

The second-quarter survey was conducted before last week's ruling by the U.S. Supreme Court in favor of President Barack Obama's healthcare reform.

Exactly half of the CEOs surveyed still planned to hire over the next 12 months, down from 57 percent in the January-March period; 42 percent planned to keep the same level of staffing and 8 percent anticipated a net decline in the number of their employees, up from 5 percent in the first quarter.

Government data on nonfarm payrolls, due for release on Friday, is expected to show employers added 90,000 jobs in June, below the level most economists say is needed to keep the unemployment rate steady.

The largest proportion of respondents in the Vistage poll, 32 percent, cited "economic uncertainty" as their main concern.

Firms also expressed "rising uncertainty about what federal tax and spending reforms will be passed to avoid a nosedive off the 2013 fiscal cliff," said Richard Curtin, an economist at the University of Michigan, in the statement.

A series of tax increases and spending cuts is due to take effect in early 2013 unless a divided Congress can find agreement on how to delay or offset them.

"It's too close and too uncertain to avoid taking some steps now to protect their firms' interests," Curtin said.

Executives scaled back plans for new business spending, with 40 percent indicating planned investment in property, plants and equipment over the next year, down from 45 percent last quarter.

Small businesses represent the backbone of the U.S. economy, accounting for about half of gross domestic product, according to some estimates.

The survey was compiled in mid-June with responses from chief executives at 1,650 small and medium-sized businesses, and has a margin of error of 1.6 percentage points.

Thomson Reuters is a shareholder in Vistage.

© 2023 Thomson/Reuters. All rights reserved.

Monday, 02 July 2012 11:42 AM
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