Economy

Small Business Optimism Ticks Down in February

Paul Ausick

Published: March 8, 2016 7:15 am

Last Updated: January 13, 2020 12:15 pm

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for February fell one point from 93.9 in January to come in at 92.9. The February reading remains well below the index’s 42-year average of 98.

The four “hard” measures of the index posted mixed results last month. The job creation component fell one percentage point in February to 10%, the job openings component slipped a point to 28%, capital spending plans fell two points to come in at 23% and inventory investment plans remained unchanged with a negative 1% reading.

Some 22% of small business owners reported raising employees’ pay in the past three months. That’s down five points on a seasonally adjusted basis from the January total. Just 12% are planning to raise wages in the next three months, a drop of three points month over month.

In its commentary on the report the NFIB noted:

NFIB data indicate slow growth in the first quarter following the 1 percent growth rate for the fourth quarter of 2015. The GDPNow forecast from the Atlanta Fed is about 2 percent and the NFIB data basically agree. Owners are very pessimistic about business conditions in the coming months and spending and hiring plans have softened. Political uncertainty remains a major concern and the President does not seem inclined to act favorably on any small business owner’s major concerns. Fed policy communications are very disconcerting, giving an impression that the economy is weak. Too much monthly dithering. All of this generates uncertainty, the enemy of spending and hiring behavior that would move the economy forward at a faster pace.

The NFIB reports that 28% of business owners currently have positions open that they are unable to fill (down one percentage point from January) and that 42% said there were few or no qualified applicants for the open positions, down three points from the prior month’s total.

Business owners said their single most important problem is taxes (21%), government regulations and red tape (19%) and quality of labor (12%). The least important problems are financing and interest rates (1%) and inflation (3%).