NFIB: Small Business Jobs up but Optimism Down

After six months of gains, the Small-Business Optimism Index fell by almost 2 points in March, settling at 92.5, the National Federation of Independent Business (NFIB) reports. After a promising start to the year, nine of ten index components dropped last month, most notably hiring plans and expected real sales growth each taking a significant dive, in spite of owners reporting the largest increase in new jobs per firm in a year, NFIB reports.

"March came in like a lion, with Main Street seeing significant job growth in March—but it appears to have gone out like a lamb, and with no cheer in the forward-looking labor market indicators. What could have been a trend in job growth is more likely a blip,” said NFIB Chief Economist Bill Dunkelberg.

“And what looked like the start of a recovery in profits fizzled out. The mood of owners is subdued—they just can’t seem to shake off the uncertainties out there, and confidence that the management team in Washington can deal with the economy effectively is flagging. What we saw in March is painfully familiar – this was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself—and not in a good way.” 

The March survey results ended what appeared to be steady, albeit slow, trend of improvement for the small-business sector of the economy, NFIB says. The percent of owners reporting inflation as their No. 1 business problem is now at nine percent, an increase from six percent in January. Reports of increases in average selling prices are rising and net 21 percent of the owners plan to raise their selling prices in the coming months. 

Some other highlights of March’s Optimism Index include:

•    Job Creation: Job creation in March was the bright spot in this month’s Index; the net change in employment per firm seasonally adjusted was 0.22, far above January’s “0” reading. Seasonally adjusted, 10 percent of the owners added an average of 3.1 workers per firm over the past few months, and 13 percent reduced employment an average of 2.1 workers per firm. The remaining 77 percent of owners made no net change in employment. Forty-four (44) percent of owners hired or tried to hire in the last three months and 32 percent reported few or no qualified applicants for positions. The ability to find qualified applicants for available jobs continues to be a problem for many small-business owners. 

•    Sales and Earnings: Owners reporting higher nominal sales over the past three months (seasonally adjusted) gained a surprising 8 points, rising to a net 1 percent, and providing the best reading since December 2007. However, even with the improvements in retail sales in recent months, 22 percent of owners surveyed still reported “weak sales” as their top business problem. 

•    Capital Expenditures: The frequency of reported capital outlays over the past six months fell 5 points to 52 percent, a reversal of the gains made during the two months prior. Of those making expenditures, 36 percent reported spending on new equipment (down 4 points), 20 percent acquired vehicles (down 3 points), and 13 percent improved or expanded facilities (unchanged).

•    Credit Access: Financing continues to be low on the list of concerns for small-business owners, NFIB reports. Only four percent cited financing as their top business problem, compared to 20 percent citing taxes and 19 percent citing unreasonable regulation.
The NFIB report is based on the responses of 757 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of March.


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