March Small Business Optimism Dips; Labor Costs Rise

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for March slipped by 2.9 percentage points from 107.6 in February to come in at 104.7. The consensus estimate from economists called for the index to decrease by 0.6 percentage points to 107.0.

The February index was the second-highest ever, trailing only the 108 reading posted in 1983. For 2017 the average monthly index was 104.8, the highest ever. The previous annual record was 104.6 set in 2004.

The four “hard” measures of the index posted mixed results last month. The job creation component rose two points month over month in March to 20%, the job openings component rose a point to 35%, capital spending plans fell three points to 26% and inventory investment plans also fell three points to 1%.

Some 33% of small business owners reported raising employees’ pay in the past three months. That’s up 2 percentage points on a seasonally adjusted basis from February’s total, which was the highest since 2000. Since January of 2017, net compensation changes have increased by 3 percentage points. Some 19% of small business owners are planning to raise wages in the next three months, down three points month over month and five points more compared to March 2017.

In its comments on the report, NFIB noted:

The big picture remains solid, with small firms as optimistic, and inclined to spend and hire as they have ever been. Tax cuts will start to impact firms directly and positively impact their customers. Economic growth will continue to be strong and that will spur more capital investment and hiring on Main Street.

The NFIB reports that 35% of business owners currently have positions open that they are unable to fill (up one point month over month and four points more compared to March 2017) and that 47% said there were few or no qualified applicants for the open positions, unchanged from the prior month’s total and up two points compared to March of last year.

Business owners said their single most important problem is quality of labor (21%) followed by government regulations and red tape (14%) and taxes (13%). Competition from large businesses and poor sales were the third most-cited problems (11%). The least important problems are inflation (1%) and financing/interest rates (2%).

Sponsored: Tips for Investing

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.