The NFIB Small Business Optimism Index increased in May to the second highest level in the survey’s 45-year history.
The index rose to 107.8, a three-point gain, with small businesses reporting high numbers in several key areas including compensation, profits, and sales trends.
State-specific data is unavailable, but NFIB State Director Dawn Starns said optimism over federal tax reform has been undercut by state legislators’ recent attempts to raise taxes.
“Small businesses operate on tight margins,” Starns said. “Whenever the Legislature gives serious discussion to expanding the sales tax on things like installation services or machinery, and equipment, it weakens employers’ confidence in the state’s fragile economy and discourages them from making improvements or hiring more people.”
Nationally, “Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes. For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase,” said NFIB President and CEO Juanita Duggan.
The May report hit several records:
- Compensation increases hit a 45-year high at a record net 35 percent.
- Positive earnings trends reached a survey high at a net three percent.
- Positive sales trends are at the highest level since 1995. Expansion plans are the most robust in survey history.
- A net 19 percent of small business owners are planning price increases, the highest since 2008 and a signal of a strong economy.
- A net three percent reported positive profit trends, up four points and the best reading in the survey’s history.
- A net 15 percent reported higher nominal sales in the past three months, up an astonishing seven points and the sixth consecutive strong month for sales.
- Small business owners continue to hire with a seasonally-adjusted net 18 percent planning to create new jobs.
- Twenty-nine percent of owners have job openings for skilled workers, the third highest reading since 2000.
- To compete in the job market, 35 percent of owners reported increases in labor compensation to attract job applicants.
- The percentage of owners reporting capital outlays moved up one point to 62 percent, with 47 percent reporting spending on new equipment, 24 percent acquiring vehicles, and 16 percent improving expanded facilities.
- Access to credit continues as a non-issue with 37 percent of owners reporting all credit needs were satisfied and 43 percent saying they were not interested in a loan, down seven points from last month and the lowest reading since 2007.
As reported in NFIB’s May jobs report, 23 percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, followed by taxes at 17 percent and regulations at 13 percent. Fifty-eight percent reported hiring or trying to hire, up one point from last month but 83 percent of those reported few or no qualified workers.