Small business owner confidence firmed in January, according to new data from the National Federation of Independent Business (NFIB). Specifically, the headline optimism index rose to 104.3 last month, in turn erasing most of the December decline and supporting our earlier argument that the end-of-2019 weakness was noise related to survey timing and trade deal uncertainty. Further, six of the ten main components that make up the sentiment gauge strengthened in January, including marked improvements in surveyed owners’ views of current and future earnings trends. Small business employment conditions were another bright spot last month, with the gauges of hiring and job openings both rebounding. This is consistent with last week’s encouraging private-sector payrolls report from ADP.
Forty-nine percent of owners, though, complained about there being “few or no” qualified job applicants for the vacancies they are trying to fill. That is to be expected as competing for talent has only become more challenging in the tightening labor market. However, last month’s 49 percent reading was also the first sub-50 print since April 2019 and perhaps a result of the surge in the number of owners reporting that they had boosted worker compensation recently. This trend should continue as “quality of labor” remains the top-cited problem facing surveyed owners. Concerns about taxes have also picked up a bit over the past few months, likely related to increased policy uncertainty as we near the November elections. Moreover, a new Gallup poll revealed that 90 percent of surveyed small business owners said they are paying attention to the 2020 campaign, and the majority believe their business will be better off if the current administration remains in power. Such responses are not surprising since 69 percent of surveyed owners said that their company benefited from the 2017 Tax Cuts and Jobs Act, and more than seven in ten reported that they have “reinvested over one-quarter of the savings that resulted from the tax law in their business.”
Sources: NFIB, Gallup