Small Businesses to Lift Hiring

The January 2015 NABE Business Conditions Survey report is based on the responses of 93 National Association for Business Economics members and “selected other business economists.” The most recent version of the study collected data from the December 15 to January 8 period. The report showed that, among other things:

Expectations for hiring in the first quarter of 2015 are stronger than those observations for the final quarter of 2014. The overall NRI for employment was 29, up from 25 in October.

What workers are paid should also improve:

Expectations for rising wages and salaries rose significantly, with over half (51%) of survey respondents anticipating increases in the first three months of 2015.

Economists have worried that the recovery from the recession has been one in which wages have not risen, leaving household income no better than a decade ago. The NABE research is a small sign that may change for some of the workforce.

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As prices fall across the economy, to some extent because of the collapse in energy prices, small businesses expect the prices they pay for certain goods will be flat to down:

The NRI for materials costs dropped sharply again in January to a 13-year low of -13, from 16 in October and 27 in the July survey. The share of survey respondents reporting rising costs declined to just 13%, less than half of the 30% which cited rising costs in the April, July and October surveys. One-quarter of respondents reported falling costs.

This, in turn, could be a contributor to slightly improved margins:

Profit margins grew at slightly more firms during the fourth quarter than in the third quarter of 2014. The net rising index (NRI) — the percent of responses reporting rising results minus the percent reporting falling results — rose to 24 in January, up from 16 in October’s survey. In 53% of respondents’ firms, profit margins were flat in the fourth quarter, while 35% of respondents reported rising margins, and 12% indicated that margins fell.

Behind all these improvements appears to be an overall optimism about the economy:

Expectations for economic growth continue to improve in the January survey. Two-thirds of respondents expect growth to average between 2% and 3%. Ninety-three percent of panelists currently expect GDP growth in the fourth quarter of 2015 to be greater than 2.0%.

Small business is in the midst of a virtuous cycle. As perceptions of GDP growth rise, so do the chances of adding jobs. And increased national employment should, in theory, help their prospects for the balance of the year.

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