Small business owner confidence softened last month but overall remains at a historically strong level consistent with continued growth. For example, a sentiment gauge from Wells Fargo and Gallup tumbled in January by the most in seven years but this followed the record high hit in Q4 and another large increase in the prior quarter. Confidence is therefore still near the high-end of the range for the current economic expansion even after the early 2019 drop.
Similarly, the popular small business optimism index from the National Federation of Independent Business (NFIB) fell to 101.2 in January, the largest drop since June 2015 and the lowest headline reading in more than two years. Again, though, the index remains at a historically strong level and much of the weakness in confidence is perhaps due to hopefully transitory headwinds such as recent stock market volatility and the partial government shutdown. Moreover, the bulk of the survey responses in both polls were collected in early January before the market rebound intensified and a deal to reopen the government was reached. If these issues did weigh heavily on sentiment, then some solid improvement should be seen in subsequent reports.
However, more fundamental problems remain for many small business owners, such as competing in the tight labor market. Indeed, “finding and retaining quality workers” was the biggest near-term challenge for respondents in the Wells Fargo and Gallup survey for the fourth consecutive quarter, and “labor quality” was once again the single most important business problem cited by owners in the NFIB poll. NFIB’s chief economist Bill Dunkelberg added that “Based on small business employment and hiring plans, owners aren't expecting much of an economic slowdown in the first half of the year. There is a significant shortage of qualified workers that could slow down businesses, but for the most part owners are working hard to hire and attract qualified employees.”
Sources: Wells Fargo, Gallup, NFIB
Post author: Charles Couch