Small Business Optimism Flat in May: NFIB

The report suggests job creation was very weak and finding qualified workers for open positions is a challenge for some owners.

The mood among small business owners in the United States remains the same, with concerns over future sales, health-care costs and other factors weighing on positivity, according to the National Federation of Independent Businesses, whose Index of Small Business Optimism came in at 94.4€”historically low and a reflection of the sluggish pace of economic recovery in the United States.

Though some indicators showed relative promise, such as profit trends and employment components, which remained stable, expected sales in a three-month period declined (far below readings recorded in any other recovery period since 1973), and the overall index dropped a tenth-of-a-point in May. Hiring and spending levels were weak, and 60 percent of the 681 small businesses surveyed said now is a bad time to expand their businesses. A quarter (25 percent) cited political uncertainty as the most influential factor, followed by a weak economy.

Worryingly, more owners still expect the economy to deteriorate further than those who anticipate improvement. One in five cited €œpoor sales€ as the top challenge to their business, while only 7 percent (seasonally adjusted) characterized the current period as a good time to expand facilities. The report noted that between expectations of increasing economic deterioration and lethargic or flat growth, the outlook for new spending or new hiring is poor.

€œIn the last year, small-business optimism has limped along, and today the sector is no better off than it was just over a year ago,€ NFIB chief economist William Dunkelberg said in a prepared statement. €œThe lack of progress is discouraging, producing no signs that economic activity will pick up this year at all. The calculus of spending decisions requires an estimate of future sales, tax rates, interest rates and credit availability, labor costs, health-care costs, regulatory compliance costs, all of which are very uncertain. Most of this uncertainty is the result of what is happening€”and not happening€”in Washington. Investments in jobs or plant and equipment are not the priority while people are still bracing for the worst.€

On the employment side, 10 percent of the owners surveyed added an average of 2.6 workers per firm over the past few months, and 15 percent reduced employment an average of 2.1 workers. Seasonally adjusted, the net percent of owners planning to create new jobs rose one point to 6 percent, confirming the 5-point jump recorded in April. Just over half (51 percent) of owners hired or tried to hire in the last three months, and 37 percent (73 percent of those trying to hire or hiring) reported few or no qualified applicants for positions. €œThe figures suggest that job creation was very weak, and finding workers for open positions is proving a challenge for some owners,€ the report noted. €œOverall, there was little improvement in the numbers to suggest that job creation will enjoy any precipitous increase in the near future.€