Small-Business Optimism Plunges

Recent Fed rate cuts have more small employers fearing a recession.

The recent round of Federal Reserve interest rate cuts has shaken economic confidence among small-business owners and sparked fears of a recession, the National Federation of Independent Business reported this week.

The Washington-based lobby group's monthly small-business optimism index plunged to a 17-year low in January. Owners reported cutting back on hiring and spending plans, with fewer expecting higher sales or earnings in the months ahead. The monthly index is based on a survey of the group's 600,000 members. About a quarter typically respond to the surveys.

"The index is sending a recession signal," William Dunkelberg, the group's chief economist, said in a statement. However, he added the January readings reflected a "recession in expectations" rather than in hard economic data. "Hiring plans and job openings are much stronger today than in 1991," Dunkelberg said.

Despite broader economic concerns, fewer small-business owners reported problems obtaining credit last month.