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Small Businesses in Pennsylvania and Nation Fearful about Short-term, Optimistic about the Future

A majority of U.S. small business owners will either maintain or reduce their number of full-time employees over the next 6 months, as weak sales continue to put a strain on commerce. That's according to the PNC Outlook Survey's newest findings.

In Pennsylvania, only 9% of business owners expect to hire full-time employees during the next six months, down from 15% in the spring. 9% plan to reduce full-time staff, which is unchanged from the spring.

While the short-term outlook is soft, business owners remain somewhat optimistic about the upcoming holiday season. PNC Economist Kurt Rankin said that's because people who do have jobs and income are out spending. Still, those who are spending are expected to be more cautious.

"The difference between this holiday season and what we'd expect in a normal economic environment, or a normal recovery from recession, is that debt loads probably will not be ramped up like they would be during previous holiday seasons. There's been a great deal of emphasis among households to reduce debt loads," Rankin said.

22% of Pennsylvania business owners expect an increase in fourth quarter profits versus last year, and 44% expect profits to remain at fourth quarter 2010 levels.

Job growth, industrial production and consumer sales have been positive, but slow through the middle of this year, said Rankin. That trend is expected to continue through 2012.

"From a current 9.1% unemployment rate, we're only able to forecast a fall to 8.5% by the end of next year," he said.

Weak sales continue to be the most important challenge facing businesses. Only 17% said tax incentives for hiring new employees would positively impact their hiring. 42% expect the debt ceiling deal to have a negative impact on the U.S. economy, compared to 20% who think it will have a positive impact. One-third of the businesses that responded expect the debt deal to negatively impact their business.

Still, the long-term outlook is looking up. 8 out of 10 small- and medium-sized companies hope to grow their business over the next two years.

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