by Calculated Risk on 4/12/2011 07:30:00 AM

From National Federation of Independent Business (NFIB): Hiring Up, But Optimism Down in March

The Index of Small Business Optimism gave up 2.6 points in March, falling to 91.9. Four components rose or were unchanged, while six lost ground. The “hard” components of the Index (job creation, job openings, capital spending plans and inventory plans) added two points while the “soft” components (the other six in the table above) gave up 31 points. Index was driven by weaker expectations for real sales gains and business conditions and a marked deterioration in profit trends. The decline in the percent of owners expecting higher real sales and better business conditions in six months alone account for 76 percent of the decline in the Index.
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Twenty-five (25) percent of the owners reported that weak sales continued to be their top business problem

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 decreased to 91.9 in March from 94.5 in February.

This has been trending up, although the level is still very low.

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

Hiring plans decreased slightly in March. According to NFIB: “The percent of owners reporting hard to fill job openings was unchanged at 15 percent, supporting the modest reductions in the unemployment rate recently observed. Unfortunately, the net percent of owners planning to create new jobs (increasing the total number of workers employed) lost three points, falling to a net 2 percent of all firms, low, but still 12 points better than the recession low reading of negative 10 percent reached in March 2009."

Weak sales is still the top business problem with 25 percent of the owners reporting that weak sales continued to be their top business problem in March. In good times, owners usually report taxes and regulation as their biggest problems.

The recovery continues to be sluggish for this index (probably because of the high concentration of real estate related companies). Most of the decline was due to "soft" components, especially future expectations.