Small Business Owners’ Economic Outlook Falling

American consumers have gone through many a tribulation in the past two and a half years. Hopes were pinned on an economic recovery that was going to be spurred by resumed consumption growth. Nonetheless, we seem to be far from it, at least for the time being, which has had a negative impact on the optimism of small business owners. In fact, Simmons DataStream reports that as of July 17, 2010, only 14% of all small-business owners* believed that the U.S. economy will be better off in the next 12 months, down from 34% who were optimistic six months prior.

It’s true that, thanks to higher levels of optimism earlier this year, small business owners are, on average, more optimistic about the future of the U.S. economy than they were in 2008.  Optimism levels, on average, are actually, 11 percentage points higher so far for 2010 than observed in 2008.

However, such optimism has tapered off in recent months as the success of the economic rebound was drawn into question. From the beginning of August 2009 until of the middle of July 2010, economic optimism levels among small business owners fell from 39% to 14%, or a relative 65%.

News of the economic recovery losing steam seems to come from all sides, including high unemployment levels reported by the Bureau of Labor Statistics. Despite unemployment rates widely recognized as a lagging indicator of economic recovery, Simmons DataStream shows a decline in economic optimism among small business owners during months with the highest reported unemployment rates. Likewise, we see growing optimism during the months where the unemployment rate fell. Despite July unemployment numbers being lower than those in June, other economic news has put fear into small business owners whose optimism fell noticeably from 35% on June 28, 2010 to 14% on July 17.

*Small business owners are defined as self-employed Americans with 99 or fewer employees.