Optimism on the part of small businesses declined slightly this month, but current levels of confidence remain right near record highs. In this month’s survey, the index of Small Business Optimism dropped from 107.8 down to 107.2. Not only was that ahead of consensus expectations, but it was also the 7th highest monthly reading in the history of the report. A period spanning 480 months dating back to the start of 1975. The opening sentence of the commentary section of the report pretty much sums things up with the statement that “Small business owners continue to report astounding optimism as they celebrate strong sales, the creation of jobs, and more profits.”
While small business owners are just about as confident as they’ve ever been, there are always issues that businesses face in the day to day to operation of their business. In the table below, we summarize which issues businesses rank as their biggest problems. Topping the list once again this month was “Quality of Labor” which was cited by 21% of all respondents. That’s actually down from last month’s reading of 23%, but it’s still high nonetheless and suggests that wage pressures begin to build underneath the surface. One surprising aspect of this list is the issues that aren’t problems. As shown at the bottom of the table, the three smallest problems for businesses are Finance & Interest Rates (2%), Inflation (2%), and Cost of Labor (%). With the Unemployment Rate right near multi-decade lows, the FOMC hiking rates, and inflation trending higher, one would think that the combined total of these three problems would at least be greater than 11%, but that hasn’t been the case yet.