Entrepreneurial Pessimism or Worse News Coming on the Job Front?

Recently, I took a look National Federation of Independent Business (NFIB) data small business hiring to see what was going on with entrepreneurs’ hiring plans.

In its monthly survey of its members, the NFIB gathers two important statistics on this question: “job openings,” which measures the percent of companies with positions that they are currently unable to fill, and “hiring plans,” which measures the proportion of businesses that plan to increase hiring over the next three months minus the percentage that plan to decrease hiring over that period.

In the figure below, I have charted the trends in the two numbers.

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Small Business Job Openings and Hiring Plans

Entrepreneurs' hiring plans

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Source: Data contained in National Federation of Independent Businesses’ Small Business Economic Trends, March 2009.

Both numbers are much lower now than at the beginning of 2008. (No surprise there.) But, from September 2008 through January 2009, future hiring plans fell much faster than current job openings.

It’s interesting to consider why. One explanation is that entrepreneurs were expecting their hiring to be lower in the future than it was when they were surveyed. Another explanation is that the constant bombardment of bad news has made entrepreneurs unduly pessimistic, and their beliefs are more conservative than their actions.

Either way, the slight uptick in hiring plans in February 2009 suggests a ray of hope. Maybe things are starting to improve.

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About the Author: Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.

15 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

15 Reactions

  1. I think it is the news media and the government scaring everybody half to death. :)

    Very soon we’re going to see things pick up — not only among entrepreneurs’ attitudes, but in the economy.

    I’ve noticed the White House has gotten a lot smarter about “the message” in the last few weeks — and that’s a good thing because we need our President leading with a “can do” attitude.

  2. I agree Anita. We seem to be making a positive turn for the better in the last few weeks. I’m hopeful that companies will begin to hire again as confidence improves.

  3. Is the media to blame is a question that has been posed many times to me in interviews – my answer is consistent – control the controllables think about what we can do to reverse the current consciousness – 1. decide to become guardian to our mind and choose not to listen or integrate all the negativity 2. choose to spread positivity and hope through our daily conversations not yet another carrier of the sad story.

  4. Be an optimistic realist! :) They are forecasting that the Purchasing Managers’ Index of March will go up (to around 34.5) in Sweden. It is still some way to go until it could break through the 50% level, but it is going in the right direction. You could read more about this index in my next post on Open Forum in beginning of April.

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  6. Most of the people we service are only seeking to replace people at this point. Hope that changes and the data was not just a reaction to a slight over-correction on the downside.

  7. I agree with you Anita. Sometimes, the bias news broadcasts are what really caused people to ‘panic’ sometimes. Yes, you are right on how important Pres. Obama is showing to its people today. It is very important that the leader themselves will show that positive attitude towards any obstacles/challenges.

  8. These are very helpful metrics that you’re tracking , Scott. The upsurge in Hiring Plans seems to reverse course right around late January – possibly Inauguration Day? One really hopes then that President Obama can keep his message fresh and relevant. I was watching him make another address to the media yesterday with my friends and we all exhaled at the same time — another Obama economic statement.

    But it is far better than having a leader who inspires no confidence…

  9. Either way, the slight uptick in hiring plans in February 2009 suggests a ray of hope. Maybe things are starting to improve. –> I agree with you here Scott. It’s a good sign. People especially in this tough times sees every little positive thing as a big hope for tomorrow.

  10. Many of the clients I work with are starting to talk in a much more positive tone (last month when I asked how business was – I’d get a very sad story; the last couple of days – I’m hearing more positive vibes). I’m expecting that people are just going to grit their teeth and forge ahead and try to grab some opportunities during challenging times.

  11. This is the first real recession we have had since 1991. When we factor in the length of the last economic cycle that produced growth for almost 17 years with the exception on a couple of quarters in 2001, it is no surprise that pessimism still abounds. Recovery for small businesses will be slow but we will pull through.

    Alex N
    http://www.smallbusinessplanresources.com

  12. This is the first real recession we have had since 1991. –> Alex, just wondering are there times of unreal recession? I am sorry about that but I was just really wondering when are those times/ exact years you felt it was recession.

  13. Very nice graph. I am not surprised to see 5 months under 0%. However, the trend in February is promising. I would be interested to see if the trend continued in March. Let us know if you have that info.

  14. Hopefully the media will do more layoffs and get rid of the scare-mongering types…

  15. Sorry, that wasn’t fair of me to say. I don’t want to see any one lose their jobs. I tire of the negative reporting and coverage and spin that doesn’t help our situation at all.

    I appreciate this White House trying to change the tone, too.

    I have heard clients talk about how they are more optimistic about keeping people, but also needing to be fast and smart and thoughtful about how they continue to drive sales, and thus hire more people.

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