The Small Business Recession Not Over

The National Bureau of Economic Research (NBER) - the folks who officially decide when recessions start and end - declared that the recession ended in June of 2009. 

This is quite a surprise to many - especially to the close to 10% of Americans who don't have jobs.  But NBER is correct.  Although the recovery has been tepid, the overall economy has been growing since Q3 of 2009.

Although the overall economy is out of recession, the small business economy is not.  We've posted in the past on the two-speed economy.  Large corporations have recovered and are growing again.  This is why the overall U.S. economy is out of recession.

But the small business economy is still in recession, which is why the recovery is so soft. 

More evidence of this comes from the September Discover Small Business Watch.  According to their survey:

• 68% of small business owners rate the economy poor, 26% rate it fair
• Only 6% rate the economy good or excellent
• 57% say the economy is getting worse; only 26% think it's getting better

Given this data it's not surprising that small business hiring is on hold.  71% said they are waiting for the economy to improve before doing any hiring. 

When asked what the biggest obstacle small businesses face when hiring, the responses were:

• 28% said an uncertain economic outlook
• 22% said not enough demand
• 17% said taxes
• only 7% said lack of credit

Earlier this year we forecast that the small business economy would start to recover in the 2nd half of this year.  We were wrong, but think our reasoning was correct and it's just the timing that was off.    

We are now forecasting that the small business economy will emerge from recession by the end of this year and start to grow early next year.  Hopefully, this time we will be right. 

Comments

[Aaron Spencer]

I agree that we are still in pretty bad shape but from what I see, things are on their way up, not down. While conditions are not ideal, there are many improvements that have been made that are changing things for the better.

[Pete]

I totally don't think that the recession is over, in fact I think it's hardly even begun!

Here in the UK, we're destined for a number of cuts to the public sector which in turn will greatly affect the private sector, including many small businesses.

Have you checked out what has happened to Ireland's economy recently? They cut too deep, too quickly and now they can't get out of recession!