Small Businesses Plan Fewer Layoffs, But Worry About Outlook-Survey

July 13, 2010

Wall Street Journal

Frances McInnis

Executives of small- to medium-sized businesses in the U.S. remain reticent to hire and have lowered their expectations about the pace of U.S. growth, according to a survey released Monday.

Still, the CEOs polled are planning fewer layoffs in year ahead, said the coordinators of the Vistage CEO Confidence Index.

"Firms are still somewhat cautious, but very few were planning to cut back," said Richard Curtin, the University of Michigan research associate professor who directed the survey. Curtin also directs the Reuters/University of Michigan consumer survey. "They have recognized that we're in a slow-growth economy, and have made adjustments in products and services."

The results come just ahead of a jobs summit Wednesday at the U.S. Chamber of Commerce, where the group will evaluate the nation's job market and outline concerns about regulation of private enterprise. An array of business lobbyists and legislators, including Alan Simpson and Erskine Bowles, the co-chairmen of President Obama's national debt commission, are expected to attend. Small businesses remain the largest source of new jobs in the U.S. economy.

The number of CEOs planning to expand their workforce was steady from the last survey, at 44%. Only 9% of executives polled are planning layoffs in the next 12 months, the lowest level in three years. Almost half--47%--were expecting to keep their number of employees constant.

The Vistage CEO Confidence Index is released quarterly by Vistage International, Inc., a CEO organization headquartered in San Diego, Calif. The second quarter survey compiles responses from 1,617 CEOs, taken between June 24 and July 2.

Although the CEOs surveyed were expecting fewer cuts to employment, they were less optimistic about the U.S. recovery than in last quarter's survey.

"When we asked how they expect the economy to perform, they have lowered their expectations looking forward," said Curtin.

The survey results indicate significant disillusion about governmental support of small businesses, with increased taxes and intrusive regulations topping the list of concerns. More than 87% of the CEOs polled feel the federal government doesn't understand the challenges small businesses face well enough to help expand business opportunities.

That was up slightly from last quarter's survey, in which 85% of CEOs felt Washington was not listening to their needs.

Small business activity in China also increased since the last survey. Nearly a quarter of CEOs polled are now doing business in China or are planning to do so, led by CEOs in the manufacturing sector, with 39% already working in China. A significant proportion of executives at retail and transport companies are also doing business in China, at 23% and 17%, respectively.

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