For the first time in 27 years, the top concern of American small-business owners is inflation.

The National Federation of Independent Business (NFIB) monthly Index of Small Business Optimism was basically unchanged in June, falling 0.1 points to a recession-level reading of 89.2.

"The top concern of small business owners today is inflation - the first time since January 1981," said NFIB chief economist William Dunkelberg.

Since 1983, the average percent of owners citing inflation as a top problem has been 3 percent.  In February 2008, 8 percent cited inflation as their top problem. By May, 17 percent said inflation was their top concern, and in June that number rocketed to 20 percent.

However, employers' plans for hiring and capital spending, as well as job openings, inventory investment plans and expected credit conditions, are all stronger than in most past recessions, Dunkelberg said.

Still, employers' expectations for real sales gains and improvements in business conditions are as bad as they were in 1980-82, the worst recession in recent years.

The net percent of owners reporting higher average selling prices rose another six points to a net 29 percent in June. Plans to raise prices rose four points to a net 36 percent of all owners - up 15 points from last September, when the Federal Reserve Board declared the existence of a credit crunch.

"The inflation problem is getting worse, not better, as the economy weakens," Dunkelberg said.

Unadjusted, 41 percent reported raising average selling prices, up four points, and 13 percent reported lower selling prices, unchanged from May.

Job creation among small business owners was down sharply in June - a decline of .5 workers per firm. Six percent of the owners increased employment by an average of 4.3 workers per firm, but 18 percent reduced employment an average of 4.6 workers per firm.

The frequency of reported capital outlays over the past six months drifted lower to 52 percent of all firms (down two points). Spending activity has declined eight points since last September and, adjusted for leasing activity, spending has fallen to early 1980s levels, Dunkelberg said.

The net percent of owners reporting earnings improvements declined in June.  Seasonally adjusted, those reporting declining earnings outnumbered those with gains by 33 percentage points, five points worse than May.

"Profits are under fire," Dunkelberg said. "Lower (interest) rates clearly are not stimulating capital spending, which has drifted lower as the Fed has cut rates. Unfortunately, the rate paid to savers has also declined as the Fed cut rates. Ordinary savers are being forced to help out the big Wall Street banks by Fed policy."