The NFIB Small Business Optimism Index plunged 3 points in June—its biggest drop in over two years. Nine out of the ten components in the index worsened last month. The only component that improved was credit conditions—no surprise given record low interest rates. But easy money doesn’t do much to stimulate the economy when businesses aren’t interested in expanding. And according to the NFIB small business survey, only 5% of businesses think now is a good time to expand—a level historically associated with recession. America’s job creators don’t want to expand because of the weak economy and hostile political climate.
Small businesses view of the political climate doesn’t bode well for next month’s survey. The June numbers don’t include the effects of the Obamacare ruling. Since the NFIB was the lead plaintiff in the case, it is safe to assume that small businesses were disappointed by the decision. Obamacare will add unknown burdens to the small business community. It includes more than 20 new taxes and mountains of regulations that haven’t even been written.
Without America’s small businesses on board, a bona fide expansion in the broader U.S. economy is likely to remain elusive.
Jeremy Jones, CFA
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