The fiscal cliff cast a dark shadow over small-business owners in December. Confidence failed to rebound from November’s historic low reading, according to the latest National Federation of Independent Business Optimism Index.

Optimism gained 0.5 points, however the recession-level reading of 88 is still the second-lowest number since March of 2010. The NFIB credits the number to a deterioration of labor market components and the high number of businesses that believe business conditions will worsen in the next six months.

Seventy percent of businesses surveyed said now is a bad time to expand, while 25% said political uncertainty is their top reason, thanks to the fiscal cliff. The top two business problems are taxes (23%) and regulations (21%) followed closely by poor sales (19%).

One bright spot was sales, which edged up slightly. The net percent of all businesses (seasonally adjusted) reporting higher nominal sales over the past three months grew five points, to a -10%.

However, consumer spending still remains weak. The net percent of owners expecting higher real sales volumes rose three points to -2%, seasonally adjusted. This is still 14 points below the 2012 high of net 12% in February. Forty percent (non-seasonally adjusted) of businesses believe sales will decline in the next three months, down three points from November.

Job creation was essentially flat in December, with 11% of firms reporting hiring an average of 2.9 workers per firm in the past few months. Thirteen percent reduced employment, however, about 1.9 workers per firm. The remaining 76% had no change in employment. Forty-one percent of businesses attempted hiring in the past three months and 33% said there were few or no qualified applicants.

Job creation plans for the future fell, however, indicating that only a net one percent of owners plan to hire over the next few months.

Credit markets were a non-issue for businesses once again, with 52% explicitly saying they did not want a loan, and only one percent reported financing as a top business problem, which is tied for the worst rating in survey history.

Finally, capital spending remains at historically-low levels, and plans to make capital outlays also remain in recession territory. Only 8% said now is a good time to expand, up two points, but the net percent of business owners expecting better business conditions in six months was a net -35%. This is unchanged from a sharp decline in November.

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