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Small business confidence up, but not enough to boost hiring

Small-business owners' confidence improved a bit in February, but entrepreneurs still aren't feeling a surge of optimism — or hiring.

That's the finding of a monthly survey by the National Federation of Independent Business. The group said Tuesday that its small-business optimism index edged up 1.9 points to 90.8 points from 88.9 points in January.

"While the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed," said NFIB chief economist Bill Dunkelberg in a prepared statement. "Far more firms report sales down quarter over quarter than up."

"Until owners' forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy," he said.

The sentiment's slight increase follows a buoyant mood on Wall Street last week as the Dow Jones industrial average reached new all-time highs. A strong employment report helped. The economy created a net 236,000 new jobs and the unemployment rate fell to 7.7 percent.

But Main Street for the most part isn't celebrating just yet. Why?

For one thing, budget cuts related to the sequester are likely to have a rolling, accumulated impact on small business. Companies with U.S. government contracts must decide which workers will likely be laid off as funds to keep them on payroll evaporate. Nervous about fallout from Washington, many small- to mid-sized employers remain cautious on spending and hiring.

Expenses associated with the Affordable Care Act are another reason why small businesses are reluctant to turn temporary workers into full-time, permanent employees.

Under the act, "full-time" is defined as averaging 30 hours per week. Small companies with 50 or more workers will need to provide full-time workers with health insurance or face a fine.

Read more: Who's Hiring: Health Care, Yes; Wall Street, No

Traditional lending options for small-business owners also remain closed. Entrepreneurs are even getting squeezed by tighter restrictions for both credit cards and home equity lines of credits, which small-business owners often fall back on to keep businesses open.

"It's a real struggle for them due to lack of access of capital," said Rohan Mathew, co-founder of the Intersect Fund, a New Brunswick, N.J.-based nonprofit that supports low-income entrepreneurs in the region.

Founded in 2008 when Mathews was a Rutgers University student, Intersect Fund connects newbie upstarts with basic entrepreneurial skills such as registering as a limited liability company or LLC, implementing a bookkeeping system, crafting a marketing plan and creating a website.

The nonprofit also offers loans of up to $25,000 for, say a car, or needed repairs after Super Storm Sandy.

Read more: Youngstown's Story: Rust Belt Turns to 'Tech Belt' in the Name of Jobs

Mathew said many who reach out to the Intersect Fund have lost a wage job and have been without work for months — even a year or more.

A separate unemployment measure that includes workers no longer looking for jobs and those working part-time for economic reasons hovers at 14.3 percent.

With limited work options and competition fierce, micro small-business owners are hoping to turn a passion — food catering, styling hair, landscaping, tailoring clothes — into a micro business, usually with five employees or less.

"They're not going to turn into Google or a billion-dollar business. That's not the point," Mathew said. "If they hire one to two people, that's a success."

The bottom line is support small upstarts, which generate meaningful locals jobs that are an alternative to working at a big-box retailer or fast-food restaurant in the neighborhood, Mathew said.

Looking ahead, few small-business owners anticipate conditions to improve. Three-quarters of small-business owners think business conditions will be the same or worse in six months.