Survey Says: No Hiring

Yet another in a string of surveys shows small businesses aren’t eager to go into expansion mode, even though—like their big-business peers—they’re seeing improved financial results.

Capitol One’s Small Business Barometer suggests stable or improved financials for small businesses. But those same businesses, concerned about the state of the economy, aren’t in any mood to spend extra money.

"Survey results for the second quarter of this year suggest that financial performance has stabilized or even started to improve for most small businesses surveyed in the U.S., continuing a trend we first observed in the first quarter," said Robert M. Kottler, executive vice president of Small Business Banking at Capital One, said in a release. "However, compared to results from the first quarter, small businesses are slightly less optimistic about economic conditions, and an increased number of small businesses plan to hold off on capital investment and job growth plans for the next six months."

Small-business owners who told the bank that business conditions were improving dropped to 32 percent in the second quarter from 39 percent in the first quarter.

Nearly 80 percent of small businesses reported that their financial condition had improved or remained stable, compared with the 2009 depth of the recession, while only 19 percent said financial conditions had worsened.

But like their peers in large businesses, small businesses are taking a wait-and-see approach to big investments in their businesses.

About 60 percent of the businesses surveyed expect to keep spending at its current level, suggesting anemic hiring and capital equipment investments at best. About 21 percent said they planned to increase their spending.

Those results suggest that much of the sound and fury coming from Washington in this election year over getting small businesses back on track really signifies nothing.

The latest Washington dust-up came Tuesday, when House Minority Leader John Boehner called on President Barack Obama to fire his entire economic team, including Treasury Secretary Timothy Geithner and economic adviser Larry Summers.

Boehner, who would replace Nancy Pelosi as Speaker of the House of Representatives if Republicans win a majority in that chamber in the November elections, also echoed the Republican party line that tax cuts enacted early in the Bush administration and scheduled to end this year should be extended. Republicans have argued that letting the tax cuts expire on the schedule a Republican-led Congress set up in the early 2000s would amount to a massive tax increase and would damage small businesses.

Obama, on vacation in Martha’s Vineyard, left spokespeople to respond to Boehner. Vice President Joe Biden dismissed Boehner’s call for the economic team’s resignation.

And Deputy White House Press Secretary Bill Burton said small businesses would be far better served if Republicans stopped blocking a bill supported by the president and designed to funnel aid to small businesses, rather than pushing for the tax-cut extensions.

"What Boehner suggests independent economists have said would only impact 3 percent or less of small businesses, at a cost of some $700 billion to the federal budget," Burton told reporters, The Hill reports. "What the president's proposing is eliminating capital gains on small businesses and freeing up lending so that we actually can create a situation where small businesses can create jobs."

But the survey by Capitol One suggests that neither side is really right. Small-business owners are famously responsive to circumstances and can make their own decisions about spending. And right now, what they’re seeing in the economy is not encouraging them to spend even as their businesses’ financial condition improves or remains the same.

So whether Obama gets his way, the Republicans get their way, or some compromise in Washington is worked out, small-business owners will make their own decisions about such key issues as hiring and investing in capital equipment, and those decisions will be the ones that make a dent in a 9.5 percent unemployment rate and a stagnant economic recovery.

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Kent Bernhard Jr. is News Editor of Portfolio.com