July 11, 2017
Economics Group
Mark Vitner, Senior Economist
[email protected] ● (704) 410-3277
Small Business Optimism Slips in June
Small Business Optimism fell 0.9 points in June to 103.6, as hopes of significant tax and regulatory reform
have faded. Most business trends remain positive, however.
Small Business Owners Remain Largely Upbeat
The National Federation of Independent Business (NFIB) Small Business
Optimism Index fell 0.9 points in June to 103.6. The index had been largely
unchanged for the past three months and has averaged 104.8 through the
first half of 2017. Small business optimism has held on to most of the jump
that took place following the presidential election, but expectations for
meaningful tax reform and regulatory reform have eased back a bit, as the
political wrangling looks much like it had in previous administrations.
While business owners are still generally upbeat, the proportion expecting
economic conditions to improve has fallen back from a high of 50 hit right
after the election to just 33 percent in June. By contrast, the net share of
business owners expecting the economy to improve was in negative
territory for most of the five years prior to the 2016 presidential election.
Operating trends all ticked back a bit in June, with the net percentage of
firms reporting stronger sales falling 9 points to -4 percent. Expectations
for sales going forward have also been scaled back and more small
businesses report that they have trimmed inventories over the past
three months. The net proportion of business owners that feel now is a
good time to expand their business also fell slightly in June but remains
more than twice as high as it was prior to the election.
Too much should not be made out of June’s decline in small business
confidence. The survey can be volatile on a monthly basis and the
three month average for the overall index and most key components
continue to point toward improvement. The initial optimism about
potential policy changes has clearly subsided. The proportion of firms
stating that burdensome regulations were their most pressing problem hit a
low of 13 percent last month and has since rebounded to 19 percent. By
contrast, business owners never really got all that optimistic about taxes.
Roughly the same proportion stated rate taxes as their single most
important problem now as prior to the election.
One of the most significant changes for small business owners this year has
been the difficulty in finding and holding onto qualified workers. The
proportion of small business owners stating that labor quality issues were
their most pressing problems has steadily increased over the past
three years. While most labor measures eased up a bit in June, a large
proportion of business owners are having difficulty finding the workers
they need. Fifty-four percent of business owners reported hiring or trying
to hire workers over the past three months, which is down 5 points from
May. A whopping 85 percent of the firms hiring or trying to hire workers in
June reported that they had few or no qualified applicants apply for their
open positions. The lack of qualified applicants will likely weigh on hiring
in coming months.
NFIB Small Business Optimism
Overall Index 1986 = 100
110
110
105
105
100
100
95
95
90
90
85
85
Small Business Optimism: Jun @ 103.6
80
80
88
90
92
94
96
98
00
02
04
06
08
10
12
14
16
Small Business Important Problems
Single Most Important Problem Facing Firms, SA 3-MMA
40%
40%
Regulations: Jun @ 16.3%
Taxes: Jun @ 21.7%
35%
35%
Poor Sales: Jun @ 9.7%
Labor Quality: Jun @ 16.7%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
88
90
92
94
96
98
00
02
04
06
08
10
12
14
16
Small Business Hiring
SA 3-MMA; Plans - Net Percent, Openings - Share Reporting
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
Plan to Hire: Jun @ 16.4%
-5%
-5%
Hard to Fill Job Openings: Jun @ 32.2%
-10%
-10%
88
90
92
Source: National Federation of Independent Business and Wells Fargo Securities
94
96
98
00
02
04
06
08
10
12
14
16
Wells Fargo Securities Economics Group
Diane Schumaker-Krieg
Global Head of Research,
Economics & Strategy
(704) 410-1801
(212) 214-5070
[email protected]
John E. Silvia, Ph.D.
Chief Economist
(704) 410-3275
[email protected]
Mark Vitner
Senior Economist
(704) 410-3277
[email protected]
Jay H. Bryson, Ph.D.
Global Economist
(704) 410-3274
[email protected]
Sam Bullard
Senior Economist
(704) 410-3280
[email protected]
Nick Bennenbroek
Currency Strategist
(212) 214-5636
[email protected]
Anika R. Khan
Senior Economist
(212) 214-8543
[email protected]
Eugenio J. Alemán, Ph.D.
Senior Economist
(704) 410-3273
[email protected]
Azhar Iqbal
Econometrician
(704) 410-3270
[email protected]
Tim Quinlan
Senior Economist
(704) 410-3283
[email protected]
Eric Viloria, CFA
Currency Strategist
(212) 214-5637
[email protected]
Sarah House
Economist
(704) 410-3282
[email protected]
Michael A. Brown
Economist
(704) 410-3278
[email protected]
Jamie Feik
Economist
(704) 410-3291
[email protected]
Erik Nelson
Currency Strategist
(212) 214-5652
[email protected]
Michael Pugliese
Economic Analyst
(704) 410-3156
[email protected]
E. Harry Pershing
Economic Analyst
(704) 410-3034
[email protected]
Hank Carmichael
Economic Analyst
(704) 410-3059
[email protected]
Donna LaFleur
Executive Assistant
(704) 410-3279
[email protected]
Dawne Howes
Administrative Assistant
(704) 410-3272
[email protected]
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