Small Business Optimism climbed to its highest level in 34 years in November, buoyed by the prospects of significant tax cuts. The National Federation of Independent Business (NFIB) Index of Small Business Optimism increased 3.7 points on the month to 107.5, and reached the second highest mark in its’ 44-year history.
Eight of the 10 index components improved in November, with the lion’s share of the gains going to a 16-point jump in Expected Business Conditions and a 13-point rise in Sales Expectations.
“The improvement in small business confidence is meaningful and suggests employment growth and business fixed investment should maintain strong momentum going into the New Year,” said Wells Fargo senior economist Mark Vitner. “The improvement in Small Business Optimism suggests tax reform may provide a more meaningful boost to economic growth in 2018.”
Small business owners have consistently highlighted taxes and regulation as their most important barriers to success—a recent political climate focused on reducing the impact of existing regulations and scaling back the adoption of new regulations, has boosted small business confidence, Vitner explained. Tax reform on the edge of passage only boosts such confidence.
Some owners said they believe now is a good time to expand; 27% of those in the November survey said as much, marking a four-point gain from October, the Wells economist said. Stated plans to increase employment also rose, by six points in November. “While hiring plans rose, actual hiring moderated. Thirteen percent of firms reported hiring workers, while 10 percent said they reduced employment,” Vitner said.
Finding qualified workers seems to be a problem for employers, as 52% reported they either hired to tried to hire workers in November, but 44% said they found few or no qualified candidates. The hiring problem has been more acute in the construction and manufacturing sectors.
– Nicholas Stern, managing editor