Small-Business Optimism Index Flat in August: NFIB

August also marked the fourth consecutive month of negative job growth for small-business owners, who are having trouble finding qualified applicants.

Small-business optimism remained flat in August, dropping 0.1 points from July for a final reading of 94, but job creation plans jumped to a level not seen since before the recession and sales expectations improved, according to the latest index from the National Federation of Independent Businesses (NFIB), which randomly sampled 759 small businesses in NFIB’s membership throughout the month of August.

August marked the fourth consecutive month of negative job growth for small-business owners. The average increase in employment for small firms surveyed was negative 0.3 workers per firm. Dramatic employment reductions have ceased but hiring has not resumed at normal levels, the report noted.

Last month just 7 percent characterized the current period as a good time to expand (down 2 points), while the net percent of owners expecting better business conditions in six months was a net negative 10 percent, 4 points worse than July’s reading.

Sixteen percent of all owners reported job openings they could not fill in the current period (down 4 points), and 9 percent reported using temporary workers, down 6 points from July. The report predicted most new jobs being created are likely to be in the part-time category.

"August in Washington was typical – nothing got done, and therefore nothing changed the outlook of small-business owners who have the same list of concerns today that they had in January, April and July," NFIB chief economist Bill Dunkelberg said in a statement. "But we saw some interesting things happening with the Index this month. The August reading provided us with a rather perplexing set of statistics; internally consistent on some dimensions, such as lower sales bringing lower profits, but contradictory in other ways, such as lower job openings but huge gains in hiring plans."

Meanwhile credit continues to be a non-issue for small employers, 7 percent of who said that all their credit needs were not met in August, up 2 points from July. A little under a third (29 percent) of owners surveyed reported all credit needs met, and 49 percent explicitly said they did not want a loan (64 percent including those who did not answer the question, presumably uninterested in borrowing).

"We know that the upcoming implementation deadlines for the healthcare law are weighing on the minds of employers, and the current dim prospects for real tax reform must be, as well," Dunkelberg continued. "The September survey will hopefully straighten things but with Syria on the horizon, the budget situation still up in the air, and Obamacare being rolled out, clarity over our economic direction is not likely to be the outcome."

The report revealed plans to add to inventories were up 3 points to a net 2 percent, in line with an improvement in expectations for sales growth, although the pace of inventory reduction continued in August, with a net negative 11 percent of all owners reporting growth in inventories, 1 point down from July. For all firms, a net negative 1 percent (up 1 point) reported stocks too low, unchanged from July.