Small businesses still wondering: When will customers come back?

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Many small businesses have stopped cutting jobs but owners’ confidence level remains depressed, falling in March for a second straight month to the lowest since July, a new survey shows.

The National Federation of Independent Business said its small-business optimism index declined to 86.8 in March from 88 in February. Although the index has recovered from its recession low of 81 in March 2009, it has remained at poor levels despite the rebound in the economy overall.

The optimism index has been below 90 for 18 consecutive months. In the 2001 recession, by contrast, it never fell below 96.3.

“The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Poor sales and uncertainty continue to overwhelm any other good news about the economy.”

The No. 1 challenge reported by small-business owners: the lack of paying customers coming through the door.
Weak sales were listed as the “single most important problem” by 34% of the firms in the March survey, up from 31% one year earlier. Taxes were a distant second in the latest survey, listed by 19% of respondents. That was down from 22% a year earlier.

The March survey data were based on responses from 948 small businesses nationwide. The NFIB’s members include firms in manufacturing, construction, retail, agriculture and other key industry sectors.

The latest survey at least showed that small businesses, on average, no longer were paring their payrolls. An index measuring employment changes was flat, confirming that “workforce reductions have ended,” the NFIB said.

“This sets the stage for job creation -- if owners become optimistic enough to think new hires can generate enough additional business to pay their way,” Dunkelberg said.

-- Tom Petruno