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Small business optimism falls to lowest level since June 2014

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Small business optimism falls to lowest level since June 2014

All 10 components of NFIB survey decline during March.

The National Federation of Independent Businesses reporting today that its Small Business Optimism Index fell 2.8 points to 95.2, declining in concert with the weak stream of reports on the economy. All 10 Index components declined, contributing to the 31 point decline in net positive responses.

Jobs and Wages

The net percent of owners reporting an increase in employment fell 5 percentage points to a net negative 1% of owners, down substantially from the recent high of 9% in December 2014. Overall, the average increase in workers per firm was 0.18 workers per firm, besting the stats for January and February which were excellent readings. Fifty percent reported hiring or trying to hire (down 3 points), but 42% reported few or no qualified applicants for the positions they were trying to fill. Ten percent reported using temporary workers, down 2 points. Twenty-four percent of all owners reported job openings they could not fill in the current period, down 5 points from February which was the highest reading since March, 2006. A net 10 percent are planning to create new jobs, down 2 points but a solid reading.

“It is no surprise that optimism is muted and that owners’ expectations about the future are less than exuberant."


The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months improved 3 points, to a net negative 3%. Consumer spending has not shown much energy in the past few months. Eleven percent cited weak sales as their top business problem, down 1 point. Expected real sales volumes posted a 2 point decline, falling to a net 13% of owners expecting gains, after a 5 point decline in January and February. Sales prospects are still looking reasonably good to owners, just not as hot as in the fourth quarter last year.

Earnings trends deteriorated 3 points, falling to a net negative 22%. Reports of increased labor compensation rose 2 percentage points to a net 22% of all owners. A seasonally adjusted net 13% plan to raise compensation in the coming months (down 1 point). The reported gains in compensation are still in the range typical of an economy with reasonable growth, and labor market conditions are suggestive of a tightening, which will put further upward pressure on compensation along with government regulations including the healthcare law.

Capital Spending

Fifty-eight percent reported outlays, down 2 points. Spending has not caught fire in spite of historically low interest rates, due primarily to uncertainty and tepid expected growth. Of those making expenditures, 40% reported spending on new equipment (down 3 points), 24% acquired vehicles (down 1 point), and 14% improved or expanded facilities (down 2 points). The percent of owners planning capital outlays in the next 3 to 6 months fell 2 points to 24%, not a strong reading historically. Of the 42 percent of owners who said it was a bad time to expand (down 1 point), 21% (down 2 points) still blamed the political environment.


Seasonally adjusted, the net percent of owners raising selling prices was just 2%, suggesting that there are few inflation pressures coming from Main Street. Seasonally adjusted, a net 15% plan price hikes (down 4 points).

According to the report’s conclusion,

“It is no surprise that optimism is muted and that owners’ expectations about the future are less than exuberant. Government policies increasingly impinge on the private sector, diverting resources to unproductive uses like 9,000 IRS employees to exact ACA penalties on taxpayers. When new business owners were asked to characterize difficulties encountered and whether or not they were more difficult or less difficult than expected, 60 percent said that government regulations and red tape were much worse than expected, far more than any other factor. That survey was taken in 1990 – it has only worsened.”

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