U.S. Small Businesses Growing Gloomier as Fed Rate Cut Looms
By Joshua Kirby
Small-business owners in the U.S. are increasingly pessimistic as uncertainty clouds the economic outlook.
The National Federation of Independent Business said Tuesday that its small-business optimism index slumped to 91.2 in August from 93.7 in July, a much worse decline than forecast by economists in a poll by The Wall Street Journal ahead of the release. That reverses an improvement in confidence a month earlier, when the index climbed to its highest point since the escalation of the Russia-Ukraine conflict.
"The mood on Main Street worsened in August, despite last month's gains," said NFIB's chief economist, Bill Dunkelberg.
"Uncertainty among small business owners continues to rise as expectations for future business conditions worsen," he said.
Inflation remains the top concern for small businesses, the survey showed, with just under a quarter of owners listing it as their most serious headache. And tightness in the jobs market is also still a problem, despite recent signs of slackening. Adjusted for seasonal shifts, 40% of all small business owners reported job openings they could not fill in their current period, up two points from July. Of the two-thirds of owners hiring or trying to hire in August, the large majority reported a dearth of applicants, NFIB said.
A worsening mood among the nation's small businesses comes as the Federal Reserve prepares to cut interest rates from their current heights, following a series of aggressive hikes between 2022 and 2023 aimed at combating decades-high levels of inflation. High rates oppress growth, and with signs of weakness in the economy, the Fed has signaled it is now ready to begin the process of lowering borrowing costs. But the pace and rhythm of cuts remain a source of uncertainty.
Recent comments from Fed officials suggest a leaning toward caution, economists at Pantheon Macroeconomics said in a recent note to clients. But that could change if inflation continues to ease and hiring weakens again, they said.
"By the meeting in November, with two more employment reports in hand, the case for rapid rate cuts will be overwhelming," Pantheon said.
Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby
(END) Dow Jones Newswires
September 10, 2024 06:14 ET (10:14 GMT)
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