NFIB Index: Small Business Optimism is Up

Tom Scott
CA Executive Director, National Federation of Independent Business

The National Federation of Independent Business (NFIB) monthly Index of Small Business Optimism, released yesterday,  rose 1.6 percent in July to 105.2, a strong performance led by significant gains in hiring activity.

Strong consumer demand is boosting small business optimism at the federal level. Small business owners are feeling better about the economy because their customers are feeling better about the economy. This is a good trend at the national level that we hope translates to the state level here in California.

Our strengthening Small Business Optimism Index comes on the heels of troubling data for California released by the Bureau of Economic Analysis. Their recent state-by-state report shows GDP growth in California flatlining at .1% compared to 3.9% in Texas. Small businesses in California cannot rely on national optimism alone to survive in this difficult state.

Among the 10 components that make up the Index, seven improved, two declined, and one remained unchanged. The biggest gains were: job openings (+5); job creation plans (+4); and sales expectations (+5).

NFIB Chief Economist Bill Dunkelberg said, “Sixty percent of small business owners reported hiring or trying to hire in July. Within that group, 87 percent said they had a tough time finding qualified workers. The labor market is getting very tight, and the problem is most severe in the construction and manufacturing sectors.”

Business owners cite “lack of specific skills” as the main reason they can’t find qualified workers, according to new NFIB research included in the July report. Other common reasons include: work history; social skills; wage expectations; and attitude.

Nineteen percent of small business owners listed lack of qualified workers as their number-one problem, second only to taxes.

While most of the components were strong in July, capital expenditures remained average. Capital expenditure plans dropped 2 points. Fifty-seven percent of owners made capital outlays, which was unchanged from the previous month.

Small business owners are waiting to see what happens on tax reform before they make big capital improvements or acquisitions.

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