Sharp Rise in Small Business Optimism for Sales, Hiring

While the overall index improved only marginally, two component indexes showed significant gains. Sales expectations rose seven points and hiring expectations rose four points. Some 15% of business owners now expect better sales and 12% plan to hire more employees. Small business owners are still concerned with large inventories and lower profits, however.

Some 12% of small businesses now plan to increase hiring, leading the NFIB’s chief economist to say:

Employment starts 2014 over a million below its peak in January 2008 and prospects for a major recovery in jobs are not good. NFIB labor market indicators have recently seen a return to normal (but not expansion) levels, encouraging in that reversals are now less likely. The average increase in workers per firm has also risen in recent quarters, indicating new job creation. However, there are far fewer firms hiring workers than there were in 2007 and many of those still in existence have downsized.

The NFIB reports that 46% of business owners hired or tried to hire new employees in the past three months and that 83% of those said there were few or no qualified applicants for the open positions.

Another promising note was struck in the wages area. On a seasonally adjusted basis, a net 19% of small businesses reported paying higher compensation, the highest reading since 2008. A net 11% of business owners plan to raise compensation in the next few months.