Today’s release of the NFIB Small Business Optimism Report showed a slightly larger than expected downtick in overall optimism. With economists collectively expecting the overall index to decline from 105.8 down to 105.6, the actual reading came in at 105.3. Despite the larger than expected decline, overall optimism is much higher than where it was just a few months ago, well above its average level of 96.0 dating back to 2000, and also right near its cycle highs. So from an economic perspective, it’s hard to get too disappointed with this reading. That said, while optimism remains solid, as the NFIB stated in the report, “Optimism has not faded, but the enthusiasm has yet to be translated into an equally impressive increase in spending and hiring. This will require progress on the agenda that business owners voted for.”
Within each month’s survey, the NFIB asks small business owners what the number one problem is that they face in running their businesses. In this month’s data, we saw a lot of sizable changes. For the first time in a long time, Taxes and Government Red Tape are not the two top problems cited. Taxes remain at the top with 22% of small businesses citing it as their number one problem, but Govt Red Tape saw a sharp drop in the percentage of businesses that cited it as their number one problem, falling from 19% down to 15%. At the same time, Labor Quality moved up two percentage points from 15% to 17%. In terms of Labor, the increase of businesses citing Labor Quality as their number one problem could ultimately lead to increased labor costs down the road as business owners are forced to pay up for better workers. That didn’t show up in this month’s report, though, as Cost of Labor was actually only cited by 5% of small business owners as their number one problem, which was down from 7% in January.
The charts below show the change over time in the percentage of small businesses that cited Quality of Labor and Government Red Tape as their number one problems. In the case of Quality of Labor, this month’s reading of 17% is tied for the highest reading in the history of the survey going back to 2008. Meanwhile, the 15% of small business owners that cited Government Red Tape as their number one problem dropped down to its lowest level since June 2011. It’s amazing what a changed tone out of Washington can do for sentiment.
To see Bespoke’s full line of macro and micro research, sign up for one of our premium membership options today! You won’t be disappointed.