The May Small Business Optimism Index increased to the second highest level in the NFIB survey’s 45-year history, rising to 107.8 from 104.8, with small businesses reporting high numbers in several key areas including compensation, profits, and sales trends amid euphoria over Trump’s economic, fiscal and tax policies .
“Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes. For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase,” said NFIB President and CEO Juanita Duggan
The May report hit several records:
- Compensation increases hit a 45-year high at a record net 35 percent.
- Positive earnings trends reached a survey high at a net three percent.
- Positive sales trends are at the highest level since 1995.
- Expansion plans are the most robust in survey history.
Reports of higher worker compensation pushed 2 points higher to a record net 35 percent of all firms.
The frequency of reports of positive profit trends improved 4 percentage points to a net 3 percent reporting quarter on quarter profit improvements, the best reading in the survey’s 45 year history as “the new tax law and the strong economy are very supportive of profit improvements.”
In another interesting marker, a net 19 percent of small business owners are planning price increases, the highest since 2008 and a signal of a strong economy. A net three percent reported positive profit trends, up four points and the best reading in the survey’s history. In addition, a net 15 percent reported higher nominal sales in the past three months, up an astonishing seven points and the sixth consecutive strong month for sales.
“Small business owners are continuing an 18-month streak of unprecedented optimism which is leading to more hiring and raising wages,” said NFIB Chief Economist Bill Dunkelberg. “While they continue to face challenges in hiring qualified workers, they now have more resources to commit to attracting candidates.”
Small business owners continue to hire with a seasonally-adjusted net 18 percent planning to create new jobs. Twenty-nine percent of owners have job openings for skilled workers, the third highest reading since 2000. Twelve percent have job openings for unskilled workers, with the strongest demand in the transportation, travel, communications, utilities sector. To compete in the job market, 35 percent of owners reported increases in labor compensation to attract job applicants.
The percentage of owners reporting capital outlays moved up one point to 62 percent, with 47 percent reporting spending on new equipment, 24 percent acquiring vehicles, and 16 percent improving expanded facilities. Thirty percent plan capital outlays in the next few months.
Access to credit continues as a non-issue with 37 percent of owners reporting all credit needs were satisfied and 43 percent saying they were not interested in a loan, down seven points from last month and the lowest reading since 2007. Only one percent reported that financing was their top business problem. Owners planning to build inventories rose three points to a net four percent, the nineteenth positive reading in the past 20 months.
As reported in NFIB’s May jobs report, 23 percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, followed by taxes at 17 percent and regulations at 13 percent. Fifty-eight percent reported hiring or trying to hire, up one point from last month but 83 percent of those reported few or no qualified workers.