A new survey shows that business owners, as usual, are more optimistic than everyone else. Here's why that's no longer a sign that they're crazy.
Small businesses owners – as a group – may be the most irrationally exuberant people in the nation right now. According to a new survey, 22 percent expect to increase hiring in the next year vs. 8 percent who expect it to decline. This expectation is so at odds with actual experience it suggests an outlook akin to a Cubs fan on opening day who has just learned the Cardinals have gone out of business.
This shouldn’t be all that surprising given that anyone who starts his or her own company has to have access to more hope than your average worker bee. Also, while January means the winter blues for many, for SBOs it’s the start of a shiny new year. According to the Wells Fargo/Gallup Small Business Index (try saying that three times fast), January is always a good month for hiring expectations. Only once in the last eight years have the pessimists among owners outnumbered the optimists at the start of the year (2009 – no surprise). The 14 percent margin of difference this year is the most since the 2007 when it was 19 percent.
What makes this number so astonishing are the facts on the ground. Since 2008 the number of small companies reporting a decrease in jobs in the previous year has always been significantly larger than the number saying they added people. The Wells Fargo survey shows that 22 percent reported a decrease in jobs last year, while 13 percent reported an increase. The 9 percent difference is the smallest since mid-2008.
While these self-reported numbers are grim, the overall picture is actually nowhere near as bad.
Consider: Between 2008 and 2009 the number of small businesses (fewer than 500 employees) dropped from 5.9 million to 5.7 million, according to the SBA and the Census Bureau. Despite this they were able increase the number of jobs they provide in the economy. In 2007 they were responsible 37.8 percent of all jobs and in 2010 that number had actually managed to grow to 38.4 percent. And small business continues to lead the way in job creation. From the beginning of 2010 to the second quarter of 2011 (the latest firm size data available), businesses with 20-499 employees were responsible for 63 percent off all new jobs in the U.S.
Also, small business exports continue to edge up. According to Bloomberg:
Companies with fewer than 500 employees accounted for 35 percent of exports in the third quarter of 2011, according to preliminary figures from the Census Bureau, up from about 32.8 percent in 2009.
While that's not a lot — and a damn sight short of President Obama's goal of doubling U.S. sales abroad by 2015 — it's something to be rationally exuberant about.
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