Small Firms Grow More Pessimistic on Economy

Small-business owners as a group expect the U.S. economy to languish during the second half of the year, with growth below potential, unemployment on the rise and inflation pressures muted, the National Federation of Independent Business said Friday.

The trade group said its index of small-business optimism fell 2.3 points in June to 97.2, driven in part by a decline in the portion of firms expecting the economy to improve by year-end.

Besides an 8-percentage-point drop to only 10% of firms expecting the economy to improve in the next six months, the decline was driven by a slide in the portion of firms expecting real sales to be higher by the fourth quarter and a dip in the percentage of firms reporting higher earnings, the group said.

Jobs were lost as small businesses continued to shed labor, the group said. Small businesses cut total employment by an average of 0.2 employees per firm in May and by 0.1 in June.

Wage increases were on the wane. Only 29% of the firms surveyed reported increasing labor compensation, 5 points below the record set in February, the group said.

Only 6% of the small firms cited labor costs as their No. 1 business concern.