By Xavier Fontdegloria
Small-business owners in the U.S. grew slightly more upbeat in February as the job market tightened and earnings improved, data from a survey compiled by the National Federation of Independent Business showed Tuesday.
The NFIB Small Business Optimism Index was 95.8 in February, up 0.8 points from January but still below the average reading of 98.
The reading missed economists' forecasts, who polled by The Wall Street Journal expected the index to increase to 96.5.
The rise in February, albeit small, breaks a three-month consecutive fall for the indicator. The optimism index stood at 104.5 one year ago, the last reading before the Covid-19 pandemic hit the U.S.
"Small business owners worked hard in February to overcome unexpected weather conditions along with the ongoing Covid-19 pandemic," NFIB Chief Economist Bill Dunkelberg said. The economic recovery remains uneven for small businesses, he said.
The NFIB is a monthly snapshot of small businesses in the U.S., which account for nearly half of private sector jobs. Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy.
Five of the 10 components that form the index improved, four declined and one was unchanged in February compared with the previous month.
The rise in the headline optimism index was driven by an increase of seven points to 40% of the percentage of owners reporting job openings that couldn't be filled, signaling that the labor market for small businesses is tightening.
"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 report said. This should start to ease as more workers return to the labor force, it said.
Earnings trends over the past three months improved five points to a net negative 11% of owners reporting higher earnings compared to the prior period.
The number of small-business owners expecting better business conditions over the next six months also increased, by four points to a net negative 19%, although the reading is still low.
Plans to increase employment and to make capital outlays increased by a marginal one point, the data showed.
The number of owners who plan to inventory investment in the coming months, expect higher real sales volumes, expect easier credit conditions and think that currently it's a good time to expand fell slightly compared with the previous month.
Among the surveyed, 5% of owners viewed current inventory stocks as too low in February, unchanged from January and at record high levels. "More owners are reporting inventory declines than gains because sales have been so strong that their supply chains can't keep them stocked as desired," the report said.
Of owners surveyed, 24% selected the quality of labor as their top business problem, followed by taxes and government regulation.
The NFIB Uncertainty Index decreased five points to 75, suggesting the current views of the respondents are held with somewhat greater certainty.
"There is still significant policy uncertainty, for Covid-19, tax policy, and the focus of regulations from the regulatory agencies," Mr. Dunkelberg said.
Write to Xavier Fontdegloria at email@example.com
(END) Dow Jones Newswires
March 09, 2021 06:22 ET (11:22 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.