Hiring Gains Fail to Boost Small-Business Optimism

Despite positive indicators in the U.S. economy and in small-business hiring, the National Federation of Independent Business’ (NFIB) Small-Business Optimism Index dipped 2.6 points in March, ending seven months of modest but continuous growth. The report--a monthly survey of small-business owners--attributed the decrease to inflation and continued regulatory and political uncertainty.

Small businesses are responding to the inflationary period by increasing prices. A 9.0 percent price increase in March marked the second consecutive month of price hikes, reversing a nearly two-year trend of reported price decreases. Eliminating excess inventory was a major factor in the price increases, according to the report.

Gross domestic product and employment increases in the broader economy weren’t cause for optimism among the survey’s respondents. More than three-quarters of the 2.6 decrease in the Optimism Index is attributed to a decline in small-business owners expecting higher real sales and better business conditions in the next six months. "It looks like everyone became more pessimistic in March," said Bill Dunkelberg, NFIB’s chief economist.

The employment picture accounted for one of the report’s few positive indicators. Small businesses added an average of 0.17 employees per company over the last three months, and 18.0 percent plan to add workers over the next three months.