June Small Business Optimism Slips, Pay Dips 4%

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The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for June fell 0.9 percentage points from 104.5 in May to come in at 103.6. The index’s most recent peak came in January at 105.9.

The four “hard” measures of the index posted mixed results last month. The job creation component fell by three points month over month in June to 15%, the job openings component fell four points to 30%, capital spending plans rose two points to 30% and inventory investment plans rose three points to 4%.

Some 24% of small business owners reported raising employees’ pay in the past three months. That’s down four points on a seasonally adjusted basis from the May total. Since January, net compensation changes have dropped six percentage points. Only 18% of small business owners are planning to raise wages in the next three months, unchanged month over month and unchanged compared to January.

In its comments on the report, NFIB noted:

A continuation of the high levels of optimism in the small business sector will depend heavily on Congressional progress on the major issues for small business owners: healthcare, tax reform and regulatory relief. The Republicans have the votes to pass any bill that they agree on, but seem unable to agree on any bill, unable to find one that satisfies all the “opinion camps” in their membership. Because of this, by withholding all their votes on anything, the Democrats can block any bill which has only a few senators in opposition. More substantial progress is needed on these major issues if owner optimism is to be sustained and produce accelerated hiring and spending.

The NFIB reports that 30% of business owners currently have positions open that they are not able to fill (down three percentage points from May and January) and that 46% said there were few or no qualified applicants for the open positions, down five points from the prior month’s total.

Business owners said their single most important problem is taxes (22%), followed by government regulations and red tape (19%). Quality of labor (15%) and poor sales (10%) were the third and fourth most-cited problems. The least important problems are financing/interest rates and inflation, both at 1%.