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Main Street biz still strong
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August 16, 2000: 12:22 p.m. ET
Economy shows signs of slowing a bit, but small business is still going strong
By Staff Writer Steve Bills
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NEW YORK (CNNfn) - Mark Phaup, head of a mortgage company in Richmond, Va., is not too concerned about rising interest rates.
"Business is good. I still see a pretty strong building market," said the president and owner of Capital Home Mortgage. He is still able to make a 30-year, fixed-rate loan below 8 percent, and that, he said, is 1-1/2 points lower than the short-term prime rate.
 As a result, Phaup is relatively calm about the efforts of Alan Greenspan, head of the Federal Reserve Board, to curb growth in the economy by raising rates: "He slowed things down a little bit, but it's still a pretty good market."
Phaup's confidence seems to be shared by a growing number of small-business people in the United States. According to a report by the National Federation of Independent Business Education Foundation, Main Street's optimism rebounded in July after a cooling of sentiment in June.
'Forecasters have egg on their faces'
"It seems the economy did a head fake on us," said William C. Dunkelberg, chief economist of the Washington, D.C.-based NFIB. "Once again, the forecasters have egg on their faces. The economy slowed a fair amount in the second quarter, but now we're back to a very strong third-quarter outlook."
The group's Small Business Optimism Index, a 10-component measure of the economy's status, gained a substantial 3.2 points from June to stand at a seasonally adjusted 101.1 in July.
 Many of the economy's major indicators have pointed recently to a slower pace of growth, raising hope in the markets that the Federal Reserve will not see a need to raise rates further in a bid to prevent a surge of inflation.
Indeed, some merchants are feeling the impact of Fed tightening, especially in industries that are sensitive to interest rate changes. Patrick Gambino of Gambino Ford in Lockport, N.Y., is one who has noticed the change. Car sales "are kind of stagnant right now. They were growing," he said. "They tried to slow the economy down and it worked."
But other entrepreneurs, in fields that are perhaps more removed from transitory economic wiggles, say their business is strong. "We're kind of insulated" from interest-rate fluctuations, said George Lozano, founder and chief executive of Condortech Services, which installs security systems in corporate and government buildings.
"Security now is a need. Like you need food to eat, buildings need security," he said, adding that he has had customers on a three-month waiting list for the last three years. "We're not even knocking on doors."
Labor market remains tight
What does worry Lozano is getting and keeping good workers. "That's a major issue in our industry," he said. The 20-employee Condortech has lost a couple of engineers recently to information-technology companies that offered more money. And while the company offers a three-month training program for new employees as well as other benefits, he said, "there is always the constant fear that after you train them they will walk out."
That concern is widespread among small employers, the survey found. Nearly one in five cited a shortage of qualified labor as their biggest business problem, second only to taxes.
"It is virtually certain that year-2000 labor markets will be the tightest on record when the year is done," economist Dunkelberg said. Even so, hiring plans strengthened in July after a six-month slide, with 18 percent of firms reporting intentions to add to staff. And roughly a third of employers reported having hard-to-fill job openings.
Capital spending plans, meanwhile, rose to 34 percent of all firms in the survey, another sign of improving economic optimism.
Phaup, the Richmond mortgage broker, said he plans to move into a new building soon, although he acknowledged the difficulty of hiring loan originators. "There has been a shortage of people in my industry," he said. "The larger employee base you have, the more customers you can serve."
And even though his sales this year are running behind last year's pace, upstate New York Ford dealer Gambino said he is nearing completion of a $2 million expansion of his service department, and he hopes to build a new showroom in the next year or two.
Asked about his confidence in the outlook, Gambino replied: "I have confidence in the fact that new facilities bring in new customers." 
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