Small business is on a roll

Jul 10, 2018

The National Federation of Independent Business reports that its small-business optimism index fell 0.6 points in June to 107.2. Nonetheless, the index remains near historic highs. The index shot up after the 2016 election and has averaged 105.4 since December 2016, well above its average of 98 over the past 45 years.

Small-business owners surveyed by NFIB in June reported strong sales, investment and hiring plans.

Chalk that up in part to the Trump administration’s tax cuts, said Joe Brusuelas at consulting firm RSM. “They’ve seen their effective tax rate drop significantly, and that’s bolstered both optimism and activity,” he said.

NFIB reports that as unemployment has fallen, “finding qualified workers easily held on to the top spot in the ‘single most important business problem’ list."

Brusuelas said that as small-business owners compete for talent against larger employers with deeper pockets, “finding a pool of willing and available workers has been the number one challenge.”

One significant threat on the horizon, said economist Jim Diffley at IHS Markit, is escalating global trade tensions. Diffley tracks small-business employment, and he said that so far, “we’re not seeing it in our data — we wouldn’t have expected to see it yet.”

But he said that if China, Canada, and the EU retaliate against U.S. import tariffs and other punitive trade actions with more tariffs on U.S. exports, many small businesses will feel the pain.