April Small Business Optimism Remains High Despite Labor Shortage

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for April ticked up 0.1 percentage points from 104.7 in March to come in at 104.8. The consensus estimate from economists called for the index to increase by 0.3 percentage points to 105.0.

The four “hard” measures of the index posted mixed results last month. The job creation component fell four points month over month in March to 16%, the job openings component remained unchanged at 35%, capital spending plans rose three points to 29% and plans to increase inventory investment also remained flat at 1%.

In February the index reached its second-highest level ever (107.6), 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.

Some 33% of small business owners reported raising employees’ pay in the past 3 months. That’s flat on a seasonally adjusted basis with March’s total, the highest since 2000. Since January of 2017, net compensation changes have increased by 3 percentage points. Some 21% of small business owners are planning to raise wages in the next 3 months, up 2 points month over month.

NFIB President and CEO Juanita Duggan commented:

Never in the history of this survey have we seen profit trends so high. The optimism small businesses owners have about the economy is turning into new job creation, increased wages and benefits, and investment.

The current low unemployment rate is having a significant effect on hiring. From this month’s report:

Owners complain at record rates of labor quality issues, with 88 percent of those hiring or trying to hire reporting few or no qualified applicants for their open positions. Twenty-two percent (up 1 point) selected “finding qualified labor” as their top business problem, more than cited taxes, weak sales, or the cost of regulations as their top challenge.

While optimism for growth is high among small business owners, the diminished supply of workers remains a major issue, particularly in the manufacturing and homebuilding businesses.