Survey Finds Small Business Optimism at a New Record High
Just when you thought small business optimism couldn’t climb any higher, a recent study finds it’s actually grown once again. In fact the latest rise has pushed optimism to a new record high. Of course, as we’ve discussed before, this good news comes with some bad.
This latest small business optimism report comes not from the ubiquitous National Federation of Independent Business (we’ll get to them in a moment) but from Gallup and Wells Fargo. In the third quarter of 2018, their U.S. Small Business Index jumped to 118 from 106 in Q2. The result is the highest number seen in the 15-year history of the report, besting the 114 index posted in 2006.
Driving the increase in optimism overall were positive changes in a number of areas that make up the index. Among them, small business owners surveyed painted a rosier picture of their current financial situation, with 78% saying they were very or somewhat good, which is up from 73% last quarter. Cash flow in the past 12 months was also on the rise with 69% rating theirs positively compared to 63% in Q2 and cash flow expectations similarly increasing from 72% to 77%. In related news, 49% of those surveyed said they expect credit to be very or somewhat easy to obtain in the next 12 months — up from 44% in the prior survey.
While the Wells Fargo/Gallup Small Business Index saw record optimism, a recent study from National Federation of Independent Business also found unfilled job openings reaching record levels. Although the July report only notched up one percentage point from June, the 37% of small business owners who report having job openings they can’t currently fill marks a new high. Similarly businesses hiring temporary workers to fill essential positions climbed to 13%, also up a single point. Breaking out skilled labor and unskilled, the report found that one-third of business owners surveyed said they had skilled positions available while 15% had openings for unskilled workers. In both cases, the results were two percentage points higher than in June.
Speaking on the report’s latest finding and the impacts, NFIB Chief Economist Bill Dunkelberg said, “Small business owners are continuing to show that they’re looking to hire and willing to pay more to hire the right employees. Record job openings suggest that the economy can keep up its growth pace over the next few years if the labor shortage can be resolved or mitigated.” To that point, 32% of businesses surveyed said they’ve raised compensation while 22% have plans to increase it. Once again each of these figures represent increases from last month.
If recent months are any indication, this won’t be the last time we discuss small business optimism nor the growing number of open positions business owners have available. Despite a host of economic threats in the short and long term, it seems the majority of businesses are still reaping only the positives. That said, trade war implications are still a real threat for some businesses, so it will be interesting to see if future record highs are attainable in the coming months. At this point, though, it’s probably best not to bet against it.