February Small Business Optimism Posts Slight Recovery

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for February inched up from 101.2 in January to come in at 101.7. Last August the index reading of 108.8 was the highest in the 45-year history of the index. The consensus estimate from economists had called for the February index to rise to 102.5.

The percentage of business owners who now expect the economy to improve in the next few months regained five points from 6% in January to 11% in February. The percentage who expect sales to rise over the same period remained unchanged at 16%.

Some 31% of small business owners reported raising employees’ pay in the past three months. That’s down five points on a seasonally adjusted basis compared with January. Since December, net compensation projections have dropped six points to 18%.

The four “hard” measures of the index posted mixed results last month. The month-over-month job creation component fell two points to 16%, the job openings component rose two points to 37%, capital spending plans rose two points to 27% and plans to increase inventory investment fell a point to just 1%.

NFIB President and CEO Juanita Duggan commented:

Small business owners are thankful to have the government shutdown in the rear view mirror but need more certainty about the future. Small businesses put their money where their expectations are as we’ve seen when they get tax and regulatory relief. The best thing Washington can do for the small business half of the economy is to continue the policies – tax cuts and deregulation – that leave them with more resources to invest and find qualified workers.

NFIB Chief Economist Bill Dunkelberg added:

Owners still want to grow and expect they could sell more if they could hire employees to produce more. Small businesses want to expand in this growing economy but only if they can find qualified applicants for their open positions. On the positive side, now that the government is funded, owners should be getting back to business with the rebound in consumer sentiment.

Some 37% of business owners reported job openings they couldn’t fill, down by two points month over month. Almost half (49%) reported few or no qualified applicants for available jobs, unchanged compared to January’s report. More than a fifth (22%) of business owners said finding qualified workers remains their single most important business problem.