Small business owner confidence continued to improve last month, according to a new report from the National Federation of Independent Business. Specifically, the headline optimism index ended July at 107.9, better than expected and the 2nd-highest reading in the 45-year history of this survey. Under the hood, six of the ten main components that make up the sentiment gauge strengthened last month and two deteriorated. Much of the strength in July was concentrated in owners’ expectations for sales growth and business expansion, while essentially all of the weakness was related to inventory challenges. As for job creation, employment growth picked up last month with small businesses adding the largest number of workers per firm since 2006.
However, hiring last month might have been even larger because a record 37 percent of surveyed owners reported having job openings they could not fill. Further, of the 59 percent of respondents who said that they were hiring or trying to hire, 88 percent complained about there being few or no qualified applicants for the positions they were trying to fill. Twenty-three percent of surveyed owners also cited the difficulty of finding qualified workers as their business's single most important problem. Unsurprisingly, reports of higher worker compensation increased in July, as did the number of firms citing plans to raise compensation in the months ahead. With respect to the hawkish Federal Reserve, the report’s authors added that “with strong sales, lower taxes and lower regulatory costs, and the ability to raise prices, the expected return on real capital investments in plant and equipment will remain favorable, overwhelming the negative effects of higher rates.”
Post author: Charles Couch