American Express OPEN Forum

Follow:

Highlights:

Employee Management
Money
Social Media
See More
- Topics
  - The World
  - Technology
  - Money
  - Marketing
  - Managing
  - Lifestyle
  - Innovation
- Features
Search

Search OPEN Forum

Search OPEN Forum

Did We Psych Ourselves Into Thinking This Recession Would be Worse than it Really Was?

Anita Campbell Founder, Small Business Trends Recent Posts

0 Comment

Tumblr
Email

June 18, 2009

OPEN Forum Message

Business Forecasting 2012

Our special feature on forecasting sheds light on how to choose the right model, offers advice from Jack Stack and more.

Get started

Be the first to comment on this article

If you’re like me, you’ve been hearing bad economic news for so long that you just might be tuning it out. Well, here’s some news that you don’t have to tune out — because it’s positive.

The National Federation of Independent Businesses recently came out with the latest edition (June 2009) of its Small Business Optimism Index (PDF) — and it’s a second month in a row of more positive optimism by small businesses. It’s an important development.

The NFIB chart that I have so often pointed to in past months showing an ugly downward trend, now has a decidedly upward trend in the line more recently. It’s much less painful to look at (see picture).

Here’s the money quote, by NFIB Chief Economist William C. Dunkelberg, and Policy Analyst Holly Wade, of the economic outlook for the economy for the rest of 2009 (bolding added by me):

“So far, the economy seems on the course outlined in our predictions last year. We expected a negative five percent in the first quarter (BEA reported -5.7 percent, second revision), negative two percent for the current quarter (some are now anticipating positive growth, but NFIB indicators do not show that much strength), one percent in the third and four percent in the fourth. The “adjustment” to expected economic decline was likely overdone, energized by proclamations of “depression” from Washington, the media, and employees of Wall Street firms. Psychology has played a very important role in this recession. Whatever the cause, people are realizing that we are not headed into depression so spending is picking up cautiously.”

So everything will just look rosy from this point onward, right? Not exactly.

Small business profits are still at record low levels, and it will take some time for that to change. Hiring has not picked up yet (usually hiring is a lagging indicator, so as an economic indicator that’s still to be expected at this point in the recession). Supply and demand is still out of whack with regard to the housing market, and will remain so for some time.

Remember, while it’s extremely difficult to predict the exact end of a recession, there are several positive signs here. Small business owner optimism is up and we may have seen, or will soon see, the bottom of the recession according to the NFIB report:

“Overall, owner optimism is up again, reinforcing the likelihood that April marked the bottom for pessimism and signaled the bottom of the recession. Stay tuned.”