Small Business Optimism Up Slightly

Date: January 12, 2016

Businesses See Rising Sales But Tougher Conditions Ahead

According to the NFIB’s latest Small Business Economic Trends report, optimism among small business owners was slightly higher in December, though still below overage. The Small Business Optimism index rose 0.4 points in December to 95.2, under the 42-year average of 98. NFIB Chief Economist William Dunkelberg said of the current economic situation, “Below average growth for small businesses has not been offset by strong growth in large firms.” Additionally, “with the manufacturing sector in decline, large firms aren’t likely to add as much to growth in 2016.” Dunkelberg projected that in 2016 auto sales will likely decline, and while service industry growth is strong, “health insurance costs will likely also rise, an unfortunate outcome for small business owners.” Small business hiring remained weak in December, with average hiring per small business declining to -0.07 workers from November’s .01 workers. Though 55% again reported hiring or attempting to hire workers, 48% found “few or no qualified applicants for the positions they were trying to fill.” Additionally, 15% of small businesses reported that they used temporary workers, 1% lower than in November, and 28% of small business owners said they had “reported job openings they could not fill in the current period,” a 1% increase and the highest post-recession level. When asked about future hiring, 15% said they plan to add jobs, a 4% increase, “possibly driven by the surge in expected real sales gains,” Dunkelberg said.

What This Means For Small Businesses

While the labor market may be in the midst of a recovery, small business owners are far from optimistic about 2016. As MarketWatch reported, in the latest NFIB survey,”the percentage of small-business owners who expect real sales to improve rose by 9 percentage points, while those who expect better business conditions in the next six months slumped by 7 percentage points, and those who think it’s a good time fell by 3 points.” Dunkelberg explained these results, saying, “In December, Congress made expensing permanent and passed other favorable tax changes that had an immediate impact on bottom lines. However, prospects for any other substantive policy changes in 2016 are not good.” This indicates small businesses may continue their less-than-rosy outlook.

Additional Reading

Dow Jones Newswires and 24/7 Wall Street also covered the latest NFIB report.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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