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A recovery? Small businesses aren't so sure.

Two years into the recovery, the outlook among small businesses is gloomy. Will it be self-fulfilling?

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But entrepreneurship isn't enough on its own; new businesses will need to hire other employees to have any real impact on the economy. It is new, expanding businesses that historically have generated anywhere from 50 to 80 percent of job growth in the United States.

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"The jobs recovery is not going to be built on the back of the Fortune 1000," says Mr. Litan. "If and when we get a recovery, it's going to be built on the backs of new businesses."

Some companies are doing well, he adds, among them those building the next generation of Web software. Plus, with access to cloud computing, the cost of starting a business continues to fall, says Mr. Stangler. "It certainly hasn't risen."

On the other side of the scale, small businesses have a list of worries that weren't factors during past economic recoveries. Financing is one of them. Small businesses rely more heavily on banks than larger businesses do, and since banks tightened lending standards during the recession, they've had less access to credit. Small businesses also depend more on owners' personal capital, which may have dried up in the housing or stock market.

And small-business owners are wringing their hands over how new health-care and tax policies could affect them.

"It's another reason why you're a little concerned with increasing your employment significantly," says David Painter, owner of Painter Tool, a government contractor in North Huntingdon, Pa. Mr. Painter, who manufactures parts for military machinery, has actually seen business increase overall since 2007. But rather than hiring, he's adding contractors.

"By contracting out, we've found it more efficient in some ways," he says. "No matter who you contract [the work] to, you only pay for the good parts you buy."

Confidence is extremely important for future economic activity, says Raymond Vargo, the director of the Small Business Development Center at the University of Pittsburgh. Although the current sentiment is glum among small-business owners, it's changing for the better.

A year ago, Mr. Vargo was helping many small-business owners decide whether to shut down. Now, many small-business owners are looking to expand. "Find people who are willing to move on," he says he tells entrepreneurs who do business with other companies.

Even if those businesses that want to expand are still struggling to make payments, it might be worth sticking with them, he adds. "Be more patient with that customer, because down the road it could be a huge success."


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