Small business owner confidence improved last month, according to a new report from the National Federation of Independent Business (NFIB). Specifically, the headline optimism index rose by 1.7 points to 103.5 in April, the largest monthly increase in nearly a year and the highest headline reading since December. Eight of the ten main components improved in April, with notable gains seen in surveyed owners' assessments of credit conditions and earnings trends. Clearly sentiment is trying to rebound, but the recent escalation in the trade war could be another unneeded headwind going forward.
For now, though, the confidence gauge remains at a historically strong reading that is consistent with continued growth. As for small business labor conditions, total job openings declined in April. However, this is to be expected since hiring (filling vacancies) has become a bit easier as more surveyed owners have reported boosting worker compensation recently, and an elevated number of respondents cited plans to further raise wages in the months ahead. This is a natural response to a tightening labor market with increased competition for talent, and unsurprisingly slightly fewer owners complained about a lack of qualified job applicants following the latest compensation increases. The quality of labor, though, was once again the single most important problem facing surveyed owners’ small businesses, meaning that more structural changes are still needed.
Further, 8 percent of surveyed small business owners in April cited labor costs as their top concern at the moment, just below the 45-year high hit in February and more evidence of why education, training, and other productivity boosting initiatives will likely be necessary for wages to continue to rise without severely hurting profit margins (and result in consumer inflation). The report’s authors added that “The role of the small business sector in improving the productivity of the workforce is massive yet relatively invisible as it is intertwined with the daily operation of the firm. The resources used to improve skills have, however, provided a significant boost to the growth rate of the U.S. economy as firm investments in workers have clearly paid off for everyone.”
Post author: Charles Couch