A key sign the U.S. economy is getting stronger

A major wrench in the job market throughout the U.S. economic recovery has been weak hiring by smaller companies. But that may be beginning to change, with new data suggesting that small business owners are feeling more confident about their prospects.

The National Federation of Independent Businesses' Small Business Optimism Index hit 95.2 in April, the trade group said Tuesday. Along with topping forecasts, that is the first time the index has crossed that level since 2007, when the economy faced its worse slowdown since the Great Depression.

The survey of nearly 1,700 randomly selected small businesses contained other hopeful signs. First, businesses owners hired an average of 0.7 workers in April. While that seasonally adjusted figure was below March's level, it represents the seven straight month of gains and the best performance since 2006. Another 21 percent of business owners reported having job openings that they could not fill.

"Looking ahead, we expect small business optimism to gain traction as the economy starts heating up and consumer spending on discretionary items starts picking-up," said IHS Global Insight U.S. economist Ozlem Yaylaci in a client note.


The NFIB figure also is the latest sign that U.S. economic growth is accelerating this year after a slow start brought on by harsh winter weather. Unemployment fell in April to 6.3 percent, its lowest level since 2008. U.S. consumer confidence also rose sharply in the first quarter and on a global basis has now reached pre-Recession levels.

To be sure, small businesses generally remain cautious, with most owners still reluctant to expand until they are sure customer demand will continue to strengthen. NFIB chief economist Bill Dunkelberg noted that the group's optimism index remains five points below its average reading from 1973 to 2008.

But more small businesses also are reporting increases in profits and sales. If that trend continues, it could encourage hiring later this year.

"At last, small businesses seem to be breaking out of the range in place since the crash, with the headline index finally consistent with an overall expansion in the sector," Ian Shepherdson, chief U.S. economist with Pantheon Macroeconomics, in a research note.

  • Jonathan Berr

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