Small Businesses More Optimistic in May Across Numerous Measures

The amount of confidence small business owners exhibited through the end of May was considerable, but it seems as though those good feelings might not translate to more hiring in the near future.

The total amount of optimism among small business owners rose once again in May to a level of 94.4 on the National Federation of Independent Business' index, up from 92.1 a month prior. The current level is the second-highest observed by the NFIB since December 2007, but at the same time, expectations of increased hiring declined.

While most aspects of the index saw appreciable increases between April and May (most notably expectations that the economy will improve, which improved 10 points, though only to a rating of negative-5 percent), the only one that dropped was the expectations of plans to increase employment individually in the future, the report said. The decline was minimal, falling just one point to 5 percent, but nonetheless remained in the positive. Meanwhile, the number of businesses who plan to make capital outlays in the next several months held steady at 23 percent, making it the only other one of the NFIB's 10 conditions to have not improved.

"Small business confidence rising is always a good thing, but it's tough to be excited by meager growth in an otherwise tepid economy," said NFIB chief economist Bill Dunkelberg. "Washington remains in a state of policy paralysis, and while the stock market sets records, GDP posts mediocre growth. The unemployment rate remains in the mid-7s and it is departures from the labor force – not job creation – that is contributing to its decline when it does fall. It's nice to see confidence not shrinking, but there isn't much to hang your hat on in this report. We are back to where we were in May 2012. Two good months don't make a trend, but we can't have a trend without them, so it's a start."

Businesses still view government issues to be their biggest problems
The improving economy may have many small business owners feeling better about their prospects going forward, but a growing number is also worried about their tax and regulatory burdens in the future, the report said. In all, 24 percent of small business owners listed their biggest problem as being taxes in May, up from 22 percent a year earlier, but still notably below the all-time high of 32 percent. In addition, government requirements and red tape saw an increase of four points, to 23 percent from 19 percent, and is now closing in on the all-time high of 27 percent.

The third-largest concern for owners was poor sales, which 16 percent listed as the most important small business problem, but worries about this actually declined, the report said. Just a month earlier, 20 percent felt this was their primary issue. The current level now stands at less than half the all-time high of 34 percent.

Independent company owners typically have a lot on their plates when it comes to maintaining a healthy business. This can often include what they pay for the many types of small business insurance policies that they may need. By taking the time to evaluate the amount they pay for coverage including workers' compensation or liability insurance may help them to discover ways in which they might be able to save a little money and improve their bottom lines. That, in turn, might help to make future financial decisions, including the expansion of hiring, a bit easier to handle as the economy continues to improve.