by Calculated Risk on 3/08/2011 08:10:00 AM

From National Federation of Independent Business (NFIB): NFIB Small Business Optimism Index -- Slow and Steady: Continues Gradual Rise in February

The Index of Small Business Optimism gained 0.4 points in February, rising to 94.5, not the hoped-for surge that would signal a shift into “second gear” for economic growth.
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“Weak sales” still get the most votes by owners as their top business problem.
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Most notably, hiring and future plans to hire were solid and hopefully presage a string of steady job creation months this year. While historically weak, these relative gains signal good news for a sector still deeply encumbered by weak sales.
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“This is not a reading that characterizes a strongly rebounding economy,” said NFIB chief economist Bill Dunkelberg.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Click on graph for larger image in new window.

The first graph shows the small business optimism index since 1986. The index increased to 94.5 in February from 94.1 in January.

Although still fairly low, this is the highest level for the index since December 2007.

This graph shows the net hiring plans for the next three months.

Hiring plans increased slightly in February. According to NFIB: “The percent of owners reporting hard-to-fill job openings rose two points to 15 percent, indicating that a reduction in the unemployment rate is likely within the next few months. Plans to create jobs strengthened; up two points to a net 5 percent of all firms. While this is still low, it is 15 points better than the recession low reading of negative 10 percent, reached in March 2009."

Weak sales is still the top business problem with 28 percent of the owners reporting that weak sales continued to be their top business problem in February. In good times, owners usually report taxes and regulation as their biggest problems.

The recovery is sluggish for this index (probably because of the high concentration of real estate related companies), but this is the highest level for the optimism index since December 2007.