Small Business Optimism Sinks on Uncertainty

The single most visible increase in the index components for January came in the percentage of business owners — 12% — who planned to hire more employees. That number dropped five points in February to just 7%.

The NFIB’s chief economist said:

Uncertainty is a major cause of the Index’s dip. Lacking any progress in Washington and facing continued unknowns with the healthcare law, the EPA, the minimum wage, tax reform and more, it is no surprise that the Small Business Optimism Index fell, reversing a few months of modest gains. As long as uncertainty remains high, owners will remain cautious when it comes to increasing inventory. Business owners aren’t going to bet their money on a future they cannot see clearly.

The NFIB reports that 47% of business owners hired or tried to hire new employees in the past three months, and that 85% of those said there were few or no qualified applicants for the open positions.

One promising note was struck in the wages area. On a seasonally adjusted basis, a net 23% of small businesses reported paying higher compensation, the best reading since 2008. A net 14% of business owners plan to raise compensation in the next few months. Both those numbers represent increases over January.