For six straight months, optimism among small business owners has been at an historically high level. A record level was reached last November that continued through May, according to the National Federation of Independent Business (NFIB) Index of Small Business Optimism.
“The remarkable surge in optimism that began last year right after the election shows no signs of slowing down,” said NFIB president and CEO Juanita Duggan. “Small business owners are highly encouraged by the president’s regulatory reform agenda, and they remain optimistic there will be tax reform and health care reform. This is a policy-driven phenomenon.”
Five components in the index showed a gain, four declined and one remained unchanged. Employment appears to be a large factor. Hiring activity in May was near the highest levels in the 43-year history of the index, the NFIB said. A majority of owners, 59%, reported hiring or trying to hire in May. Among those who tried to hire, 86% said that they found few or no qualified workers. In fact, finding qualified workers was the second-largest concern among small business owners.
“The tight labor market has been a persistent problem for small business owners for the past several months, and the problem appears to be getting worse,” said NFIB Chief Economist Bill Dunkelberg. “It’s forcing small business owners to increase compensation, which we’re seeing in this data, to attract new workers and keep the ones they have. But it also means a lot of small business owners are short-handed. They can’t keep up with customer demand because the labor pool isn’t producing enough qualified workers. It’s a significant structural problem in the economy that policymakers will have to watch.”
Just 28% of respondents have plans for capital outlays, a slight rise from April but below historical levels for periods of growth, the NFIB said.
“Typically, in a strong economy, we see a lot more spending on capital,” Dunkelberg said. “We’re seeing increased hiring activity and some other positive signs, but the capital-outlays component is the missing ingredient for robust economic growth.”
– Adam Fusco, associate editor