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Consumer Spending Needs to Rebound Before Hiring: Tom Keene

Small businesses won’t begin hiring and spending again until consumers regain confidence in the economy, according to William Dunkelberg, chief economist at the National Federation of Independent Business.

The NFIB’s optimism index rose to 90.6 from 86.8 in March, the Washington-based group said today. The index remains below levels associated with past economic recoveries, indicating the rebound in growth will take time to develop. The report showed the employment outlook was negative in April for the 17th time in the past 18 months.

Tax cuts alone won’t help small businesses thrive, because small businesses will keep any cash saved on reserve if they don’t foresee sustainably improved conditions ahead for financing and for consumer demand, Dunkelberg said in a Bloomberg Radio interview today with Tom Keene. Instead, the Obama administration should ease taxes on consumers, he said.

“Get consumer spending back, make them feel better,” Dunkelberg said. “If I don’t think I’m going to get customers, I’m not going to take that money and start a firm.”

Proposals calling for a value-added tax, a consumption levy applied to each stage of production, “scare” small business owners because they come with compliance costs and consumers blame the businesses for price increases, Dunkelberg said. A value-added tax on top of current taxes would be “a disaster,” according to Dunkelberg.

To contact the reporters on this story: Mary Childs in New York at mchilds5@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

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