Job creation by small business owners is likely to increase modestly, according to data released today by the National Federation of Independent Business.
Job creation by U.S. business owners is likely to increase modestly, though overall sentiment remains essentially flat, according to data released today by the National Federation of Independent Business or NFIB.
Though the NFIB Index of Small Business Optimism remained historically weak in April, job creation and capital spending plans are up, said Bill Dunkelberg, NFIB chief economist, in a statement. The share of small business owners with job creation plans rose 5 percent in April, following a drop in March.
“Hopefully, this performance will hold in the coming months. However, GDP and employment growth news has not been good,” said Dunkelberg. “The Euro debt crisis continues to make news and Congress leaves us on an identical path: huge deficits, a terrifying amount of liquidity at the Fed, and no indication that anything positive will be done.”
The index – based on a survey of 1,817 randomly sampled NFIB member businesses - gained 2 points in April, following a dip in March to settle at 94.5. The gain brings the index even with its February 2011 level – the highest level since December 2007. Dunkelberg predicts small improvements in Main Street optimism, hiring and spending over the coming year.
Political uncertainty appears to be a key factor influencing small business confidence, according to an April survey conducted by Millionaire Corner. The vast majority of business owners – 82 percent - believe the economy will improve after the general election in November, according to our poll of 990 investors. Nearly two-thirds anticipate an increase in consumer confidence and spending, and more than 61 percent believe that an end to uncertainty about who will lead the country will strengthen the economy. Nearly 58 percent of the business owners believe increased confidence in American leadership will boost the stock market, and nearly 40 percent expect the political climate to improve. More than one-third anticipates additional take breaks for small business, and 32 percent expect Congress to extend the Bush-era tax cuts.
Profit and sales reports also showed improvement in the April index. Reports of positive earnings trends improved by 11 points to a negative 12 percent in April – the best reading since April 2007. Nineteen percent of small business owners – an increase of 5 points - reported an increase in profits, while 37 percent – a decline of 6 points – reported a decline in profits.
According to an NFIB statement, “Profits are the major source of capital for financing hiring and expansion for small firms, making this a very significant and welcome development.”
Sales gained 4 percent, following an 8 percent gain in March. Weak sales remain the primary concern of 19 percent of small business owners, down from the peak of 33 percent in December 2010. Despite these gains, the share expecting sales to improve in the near future fell 2 points to a seasonally adjusted 6 percent of all owners.
Job creation rose 0.1 percent in April, with 12 percent of small business owners adding an average of 3.3 workers per company and 14 percent laying off an average of 2.9 workers. Nearly three-fourths of business owners made no net changes in employment. A small share of owners – 3 percent – said they have cut employees’ pay, while 18 percent said they have given raises, leading to the highest worker compensation reading in more than three years.
Over the last three months, 47 percent of small business owners hired or tried to hire additional employees, but nearly three-fourths reported few or no qualified applicants. The results indicate a shortage of skilled workers may slow job creation efforts.