Small Business Optimism Climbs to Another Post-Recession High

As was the case in April, the single most visible increase in the index components for May came in the number of business owners who say they expect the economy to improve. That number rose nine points in May, on top of a nine-point rise in April.

The NFIB’s chief economist said:

[T]he entire gain in optimism was driven by soft components such as expectations about sales and business conditions. With prices being raised more frequently in response to rising labor and higher energy costs it is clear that small businesses are unwilling to invest in an uncertain future. As long as this is the case the economy will continue to be “bifurcated”, with the small business sector not pulling its historical weight in the GDP numbers.

The NFIB reports that 24% of business owners currently have positions open that they are unable to fill (same as April) and that 46% said there were few or no qualified applicants for the open positions, an increase of 5% from April’s total.

One promising note was struck in the wages area. On a seasonally adjusted basis, a net 20% of small businesses reported paying higher compensation, down slightly from April but still among the best readings since 2008. A net 15% of business owners plan to raise compensation in the next few months, up a point compared with the past three months’ reports.

The NFIB repeated an observation it made last month: “The reported gains in compensation are now solidly in the range typical of an economy with solid growth.”

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