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Business Owners Hopeful But Not Crazy

Forget Jeremy Lin. The hottest question of the week was, "Are entrepreneurs feeling optimistic?"
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One good thing about being the soul of free enterprise, the best hope of innovation, and the lone source of new job creation in the U.S. economy: It makes people attentive to your moods. This week no fewer than three separate surveys made headlines attempting to reveal what small business owners are thinking.

And what ARE you thinking? Well, the surveys differed, but the main takeaway was that you are optimistic. But not an idiot.

Let's start with the 0.1 percent rise from December to January in The National Federation of Independent Business’s small-business optimism index. The Wall Street Journal tried to spin this as great news because it’s the fifth straight monthly increase. But no one, including the NFIB, is buying that. The NFIB release called it a lull, pointed out that the index ended the year below where it was in February of 2011 AND that, “Optimism remains at recession levels.” It's not a good sign when the trade association is more realistic than the press.

The Kauffman Foundation and LegalZoom, meanwhile, released their first optimism survey of leaders of companies less than a  year old, and pronounced them "surprisingly optimistic." But the real surprise may be how cautious the survey takers actually were, considering that they were just a year or less out of the gate. Nearly three in four had no plans to hire in the next year. What kind of startup is that?

Why so tentative? One answer might have come from a Gallup poll released the same day, which found that 85 percent of small businesses had no plans to hire. Of those not hiring, nearly one in four said it was because they fear they may not be in business in 12 months.

Caution is indicated by some other measures, as well. For one thing U.S. retail sales were lower than expected, as auto sales finally slacked off from their explosive growth last year. Retail and food services sales rose 0.4 percent to $401.4 billion from December, missing even the modest forecasts of a 0.8 percent rise. The sales number represented a 5.8 per cent rise from January 2011, according to a US Department of Commerce report.

Even so, this is better than consumers are seeing things.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 72.5 from 75 in January. It was the first drop in six months and reflected households' anxiety over their finances. Personal financial prospects remained troublesome for most consumers. Last month’s survey reported more households seeing recent income declines than increases, for the 40th consecutive month. While one in four households anticipated financial gains in the year ahead, only one in eight expected their inflation-adjusted income to increase during 2012.

That was the case even though the Census Bureau’s Household Income Index — which measures changes in real median annual household income — rose nearly 4 percent from August to December. That was the first significant and sustained improvement in wages since December of 2008. Maybe a little cautious optimism is called for, after all.

Last updated: Feb 17, 2012

CONSTANTINE VON HOFFMAN | Columnist

Constantine von Hoffman is a writer and sometime standup comedian. His work has appeared in Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, and Boston Magazine.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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