SMB Optimism Ticks Up Again in May

For the second month in a row, small business confidence is on the rise – but according to the National Federation of Independent Business’s chief economist, there’s no reason to celebrate.

The National Federation of Independent Business’ Index of Small Business Optimism shows confidence increased by 2.3 points in May to a total of 94.4 – the second-highest reading since the beginning of the recession in December 2007. While NFIB chief economist Bill Dunkelberg says any rise is a good thing, he warns, “It’s tough to be excited by meager growth in an otherwise tepid economy.”

Dunkelberg says Washington’s paralysis and mediocre GDP growth make it hard to rejoice over the uptick in small-business confidence.

“The unemployment rate remains in the mid-8s and it is departures from the labor force – not job creation – that is contributing to its decline when it does fall,” Dunkelberg says.

Job Creation Stalls

While eight of the ten index components increased, plans to hire fell one point in May, to only 5% total.

Over the last three months, many small business owners have been frustrated when trying to hire; 38% of those surveyed say there were few or no qualified applicants for open positions.

And while many consider small businesses the engine behind job creation and economic recovery in the United States, Dunkelberg says, “The small business half of GDP is clearly not participating much beyond growth generated by population gains.”

On a brighter note, the Dunkelberg says more businesses are being created than shut down – though he adds that existing businesses are not yet replacing the workers laid off during the recession.