Owners of small businesses are the most optimistic they have been since 2007, based on a May survey by trade group National Federation of Independent Business (NFIB).
The group’s monthly Small Business Trends survey showed optimism among small businesses rose for the third consecutive month and that hiring increased slightly for the eighth straight month, the longest run of employment gains since 2006.
Other areas that reflected positive movement were the percentage of owners reporting higher sales over the previous three months and an improvement in earnings, both to near pre-recession levels. Also, profits appeared to indicate an upward trend, the survey showed.
However, the survey results had signs to temper the optimism, including that despite rising confidence, the optimism level is still below what would be expected during an economic expansion, the federation’s report on its findings said.
Optimism seems more based on expectations that sales and business conditions will improve than concrete improvements, the NFIB survey report said.
Areas linked to GDP expansion and employment growth such as job openings, capital spending and inventory all dropped slightly from April to May, the group said.
And more businesses reported lower earnings from February through May than higher earnings, though the percentage of businesses reporting lower earnings was the lowest since January 2009. Lower sales and increased costs were the most common reasons for decreased sales.
Labor Markets
On the employment front, survey respondents added .11 workers for each firm and 55% of owners either hired or tried to add employees. In addition, 46% of businesses that tried to hire could find no qualified applicants, the highest percentage since March 2009, and 24% of small businesses had openings they could not fill, also the highest since the end of 2008.
The lack of qualified applicants and percentage of businesses unable to fill openings could help push unemployment down, the group’s report said.
The number of small businesses planning to add jobs increased in May and is approaching what would be expected in a growing economy.
The percentage of businesses using temporary workers stayed the same at 14%.
Though profits showed a general tick upward, rising wages put a slight drag on margins with 24% of the respondents reporting paying higher wages in May and 15% planning to pay workers more in the coming months.
Taxes and Red Tape
When rating the lone largest problem small business owners face, high taxes tops the list with25% reporting government levies as the biggest problem, up 1% from a year ago. Owners rated government regulations and red tape second at 20% though that’s down from 23% in May of 2013.
Poor sales were viewed by 12% of small business owners as the biggest problem, down from 16% a year ago, while the quality of labor was seen by 10% of owners as the biggest problem. A year ago, 6% held that view.
Only 4% or fewer small businesses saw interest rates, inflation or labor costs as their primary problems.
