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Small Business Optimism Slips

April 9th, 2013 ::

By Karen Axelton

Beginning to see the glass as half empty, small business owners are more worried about a recession than they were a few years ago, the 2013 Small Business Economic Forecast from Pepperdine University’s Graziadio School of Business and Management reports. Conducted in partnership with Dun & Bradstreet Credibility Corp., the annual study of more than 2,700 small business owners found that more than one-third (36.2 percent) of small business owners fear a recession this year. That’s substantially up from the 28.4 percent who were worried about a recession in 2011.

In addition, small business owners are less optimistic about growth prospects than last year. In early 2012, 54 percent said they were more or somewhat more confident than they were in 2011. By contrast, in early 2013, just 45 percent reported feeling more or somewhat more confident about their business’s growth prospects for the coming year.

“Small business owners, who are optimistic by nature, are still taking a highly cautious view of the economy and their personal business prospects,” said associate professor of finance Dr. John Paglia, founding director of the Pepperdine Private Capital Markets Project. “The ‘foxhole mentality’ among small business owners to dig in and stay low has the potential to slow the still fragile recovery.”

What’s holding small business owners back from growth? Four in 10 say government regulations–specifically, taxes and healthcare–are the biggest impediment to overall growth in the GDP, compared to 32 percent who said so in 2012. Four in ten (42 percent) of respondents also believe the Affordable Care Act will make their companies’ healthcare costs rise; as a result, 33 percent plan to make changes to their coverage that will negatively affect employees.

Probably because they’re feeling cautious, fewer small business owners are planning to give their staff raises (39 percent) than were planning to do so in early 2012 (41 percent). This is despite the fact that employees’ take-home salaries have been hurt by the end of the payroll tax cut in early 2013. Of course, it could also be because small business owners themselves aren’t seeing any increase in pay—61 percent say they are not making more than the year before.

Two bright spots on the horizon are the housing market, with small business owners overall feeling that housing prices will rise 3 percent this year, and unemployment, with small business owners predicting that the national unemployment rate will decline to 8 percent.

You can view the full 2013 Small Business Economic Forecast at http://bschool.pepperdine.edu/accesscapital.

Image by Flickr user Cali4Beach (Creative Commons)

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