Small business shook off some of their blues in February, becoming slightly more upbeat as the labor market tightened and earnings grew, data from a survey by the National Federation of Independent Business showed Tuesday.
The NFIB Small Business Optimism Index rose eight-tenths of a percentage point to 95.8 in February. That was slightly below the consensus forecast for 96 and below the historical average of 98.
This was the first improvement for the index this winter. It had declined in each of the previous three-months as covid infections surged and states reimposed restrictions on businesses.
February was a challenging month due to extreme weather in parts of the country. Texas had massive power failures and a cold snap that made some roads impassable and temporarily shutdown oil production facilities.
“Small business owners worked hard in February to overcome unexpected weather conditions along with the ongoing Covid-19 pandemic,” NFIB chief economist Bill Cunkelberg said. “The economic recovery remains uneven for small businesses, especially those still managing state and local regulations and restrictions.”
Small business optimism is an important economic indicator. Small businesses account for nearly half of all private-sector jobs and newly started businesses are the most important driver of job growth.
Five of the ten components of the index improved, four declined, and one was unchanged.
The rising components were plans to expand employment, plans to make capital expenditures, expectations for economic conditions, current job openings, and earnings expectations. The decliners were plans to grow inventories, sales expectations, credit conditions expectations, and those saying now is a good time to expand. The gauge of current inventory was flat.
Fifty-one percent of owners said they had job openings that could not be filled, those accounted for 91 percent of owners looking to hire. Generous federal enhancements to unemployment insurance, which hike benefits by $300 a week, may be discouraging some employees from returning to work. Congress is set to pass legislation that will extend those enhancements until September 6. Shuttered schools are also likely weighing on the ability of adults with children at home from returning to work.
“The Covid-19 pandemic continues to disrupt the labor market with significant populations of otherwise working adults having to stay home to care for family members, protect themselves from contracting the virus, or not able to transition previous work experience quickly to available jobs,” the NFIB report said.