Optimism Stabilizes Among Small Business Owners

Date: March 12, 2019

Related Content: Press Release Economy National

Views about future business conditions improve as job creation breaks record

WASHINGTON, D.C. (Mar. 12, 2019) — The NFIB Small Business Optimism Index improved modestly in February, increasing 0.5 points to 101.7. Views about future business conditions and the current period as a good time to expand improved as did plans to make capital outlays.  Earnings trends weakened, as a million laid off workers and others affected by the shutdown cut back on spending. The loss of sales falls right to the bottom line. Worker compensation and selling prices were lower in February than they were in January, but job openings rebounded remaining at historically high levels. The Uncertainty Index fell 1 point to 85, a small decline but still showing a lot of residual uncertainty from the government shutdown.

“Small business owners are thankful to have the government shutdown in the rearview mirror but need more certainty about the future,” said NFIB President and CEO Juanita D. Duggan. “Small businesses put their money where their expectations are as we’ve seen when they get tax and regulatory relief. The best thing Washington can do for the small business half of the economy is to continue the policies – tax cuts and deregulation – that leave them with more resources to invest and find qualified workers.”

Small business owners who expect better business conditions improved five percentage points and those viewing the current period as a good time to expand increased two points in February. Twenty-seven percent plan capital outlays in the next few months, up one point.  Plans to invest were most frequent in wholesale trades (43 percent), manufacturing (39 percent), construction (32 percent), and agriculture (31 percent). 

“Owners still want to grow and expect they could sell more if they could hire employees to produce more. Small businesses want to expand in this growing economy but only if they can find qualified applicants for their open positions,” said NFIB Chief Economist Bill Dunkelberg. “On the positive side, now that the government is funded, owners should be getting back to business with the rebound in consumer sentiment.”

The frequency of reports of positive profit trends fell four points to a net negative nine percent reporting quarter on quarter profit improvements, the weakest reading since 2017.  Forty-one percent of those reporting weaker profits blamed sales, 22 percent cited lower selling prices, and nine percent blamed labor costs. For those reporting higher profits, 50 percent credited sales volumes.  Thirty-three percent credited higher prices for the results. The cost of materials was not an issue.

The net percent of owners raising average selling prices fell two points to a net 13 percent, seasonally adjusted. Unadjusted, ten percent (unchanged) reported lower average selling prices and 23 percent (down one point) reported higher average prices. Seasonally adjusted, a net 26 percent plan price hikes (down one point). With some sales weakness and concerns about the economy, likely fewer than half will actually post price hikes. 

As reported in February’s NFIB Jobs Report, job creation among small businesses broke the 45-year record in February with a net addition of 0.52 workers per firm. The previous record was in May 1998 at 0.51 workers per firm. The percent of owners citing labor costs as their most important problem also hit an all-time high, with 10 percent of owners reporting labor costs as their biggest problem. Reports of higher worker compensation fell five points to a net 31 percent of all firms.  Uncertainty is not conducive to making permanent compensation commitments. 

Click here to view the NFIB Small Business Economic Trends Survey.

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