Some have argued that the index (which Tom Keene of Bloomberg Surveillance calls the "Pessimism Index") is not grounded in reality, representing small businesses complaining about this or that. The data however reveals that in 2012, small businesses are indeed struggling. The chart below shows a sharp decline in earnings recently.
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Add to that poor sentiment, related to the results of the last election (NFIB: - "election was the primary cause of the decline in owner optimism"), the unease about healthcare costs, the uncertainty over taxes - and we are looking at stagnant growth, investment, and hiring in the small business community.