Small business optimism index more in line with recession than recovery

A monthly measure of optimism among small business owners has retreated despite some improving prospects for hiring.

The National Federation of Independent Business reported that its Index of Small Business Optimism fell 2.6 points in March to 91.9. The lower reading remains more in line with recession than recovery.

The index is based on the results of monthly surveys of randomly selected members of the NFIB, a small business advocacy organization based in Washington, D.C.

“It looks like everyone became more pessimistic in March,” said Bill Dunkelberg, chief economist for the NFIB. “Or, perhaps this is a new normal and we are unlikely to see the surges usually experienced at the start of a recovery.”

The decline — which followed several months of slow, but steady, growth in the index — reflected lower expectations for business conditions, sales and profits.

“Uncertainty continues to cloud the future while the government is persistently tone deaf to the needs of those who create jobs and wealth,” Dunkelberg said.

For March, six of 10 components of the index fell, while three components rose and one remained unchanged.

The proportion of owners responding to the survey upon which the March index was based who expect the economy to improve over the next six months tumbled 14 points to a net negative 5 percent.

The frequency of reported capital outlays over the past six months rose two points to 51 percent of firms. The share of owners planning capital outlays rose two points to 24 percent. Still, just 5 percent of owners consider now a good time to expand, down two points.

Twelve percent more owners reported lower sales than higher sales over the past three months. The proportion of owners who expect higher real sales fell eight points to a net 6 percent. Meanwhile, 25 percent of owners cited weak sales as their biggest business problem.

Reports of positive earnings trends declined five points to a net negative 32 percent, with 17 percent of owners reporting lowering prices.

The one bright spot for March was related to labor.

Small business owners reported a slight increase in hiring over the past three months, an average of 0.17 employees per firm. Meanwhile, 15 percent of owners reported unfilled job openings in March. A net 2 percent of owners plan to increase staffing over the next three months. That proportion is down three points from February, but remains positive.

A net 7 percent of owners reported raising worker compensation in March, while 9 percent said they plan to raise compensation.