Tuesday’s report on small business optimism for the month of March unexpectedly declined in March as the NFIB’s index of small business optimism fell from 98.0 down to 95.2. This marks the third straight weaker than expected reading as well as the third straight drop in the index. As shown in the chart below, the index is now back down below its average of 96.1 dating back to 2000 after five straight above-average readings. The recent decline in the index is also notable for its steepness. The last time it saw a three month fall of 5.2 points was in November 2012.
As we do each month, the table to the right lists the percentage of small businesses citing various issues as their number one problem. Topping the list this month, as they usually do, are Taxes and Government Requirements/Red Tape at 23% and 22%, respectively. After those two issues, the next biggest problem is Quality of Labor at 12%. Quality of Labor has been an issue that has been rising in prominence over the last several months. Last year at this time, it was cited by just 9% of respondents and got as high as 14% last month. While Quality of Labor has been an increasingly large problem, labor costs haven’t. In the last year, the percentage of respondents citing Cost of Labor as their number one problem has actually declined from 5% down to the current level of 4%.