U.S. Small Business Optimism Is Little Changed

The National Federation of Independent Business reported that its Small Business Optimism Index increased 0.2% during May to 93.8 following a 1.1% April rise. These were the only increases so far this year.

An improved 9% of firms reported that now was a good time to expand the business, while expectations for the overall economy increased to the least negative reading in six months. A steady 1 percent of firms expected higher real sales in six months, near the lowest in six months.

Employment prospects brightened. Twelve percent of firms expected to increase employment, the most this year; however, a higher 48% of respondents found few or no qualified candidates to fill job openings, equaling the most since September 2007. A lessened 27% of firms had positions they were not able to fill right now. A greater 26% of firms raised worker compensation over the last twelve months, but a steady 15% were expecting to raise it in the next three months.

Small businesses' pricing ability improved as 1% of firms were raising prices, the most in 6 months. Expectations about the future ability to raise prices remained muted, however, as a steady 16% of firms were planning to raise them.

Credit was slightly easer to get as 4% reported trouble, the least in six months. A stable 31% of firms felt satisfied that their borrowing needs had been filled in the last three months.

An increased 23% of firms indicated that taxes were the single most important problem, the most since last June. Working the other way, a lessened 18% reported that government requirements were the largest single problem, equaling the least since November 2012. A stronger 14% of firms indicated that poor sales were the largest single problem, and a slightly higher 13% felt challenged by the quality of labor. A lessened 8% reported insurance cost & availability as the largest problem. A stable 8% reported competition from large businesses as the largest problem, and a lessened 5% reported the cost of labor was the biggest problem. Inflation was indicated by 4% of respondents as the largest problem, the most since last June.

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's SURVEYS database.