The NFIB Small Business Optimism Index dropped 4.2 points to 94.1 in June, well below the pre-recession average of 99.5. Nine of the 10 components dropped and one remained unchanged from May.
"June terminated a promising string of improvements in owner optimism during the first months of the year," said NFIB Chief Economist Bill Dunkelberg. "While it is not a disaster or a signal of a looming recession, it is a disappointing sign that economic growth on Main Street is not set for a strong second half of growth. The weakness was substantial across the board, showing no signs of a growth spurt in the near future."
Declines in spending plans accounted for 30 percent of the Index decline, and weaker expectations for real sales and business conditions another 20 percent. The deterioration in earnings trends accounted for about a quarter of the decline.
Small businesses took a break from job creation in June, adding essentially zero new jobs, after a string of five solid months of job creation. Ten percent reported increasing employment an average of 3.2 workers per firm while 12 percent reported reducing employment an average of 3.3 workers per firm.
Fifty-two percent reported hiring or trying to hire (down 3 points), but 44 percent reported few or no qualified applicants for the positions they were trying to fill. Eighteen percent reported using temporary workers, up 5 points. Twenty-four percent of all owners reported job openings they could not fill in the current period, down 5 points, after reaching the highest level since April 2006 in February.
Earnings trends posted a 10 point decline, reversing last month’s surprising improvement and returning to a more “normal” reading for the recovery.