Outlook buoyant for small business

Index leaps 7.4, hits 12-year high

Optimism among America's small businesses soared in December as expectations about the economy's prospects improved dramatically in the aftermath of the presidential election.

The National Federation of Independent Business' index jumped 7.4 points last month to 105.8, the highest since the end of 2004, from 98.4. While seven of the 10 components increased in December, 73 percent of the monthly advance was tied to more upbeat views about the outlook for sales and the economy, the Washington-based group said.

The share of business owners who say now is a good time to expand is three times the average of the current expansion, according to the National Federation of Independent Business's data. More companies also said they plan to increase investment and keep hiring, which reflects optimism surrounding President-elect Donald Trump's plans of spurring the economy through deregulation, tax changes and infrastructure spending.

"Rising confidence adds to the economy's upward momentum," Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., said in a note. At the same time, the "NFIB membership appears to be disproportionately Republican, so it is possible that the data will start overstating strength, opposite the pattern during the Obama administration."

The National Federation of Independent Business report was based on a survey of 619 small-business owners through Dec. 28. Small companies represent more than 99 percent of all U.S employers, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise with no more than 500 employees.

Fifty percent of respondents, the biggest share since March 2002, said they expect better business conditions in the next six months. That was 38 percentage points higher than in November. The net share of firms projecting higher sales jumped by 20 points to 31 percent. Some 29 percent say they will increase capital outlays within six months.

"We haven't seen numbers like this in a long time," Juanita Duggan, president and chief executive of the federation, said in a statement. "Small business is ready for a breakout, and that can only mean very good things for the U.S. economy. Business owners are feeling better about taking risks and making investments."

U.S. employers posted more jobs in November and quitting also increased -- signs that job gains and wages may increase in the months ahead.

The number of available jobs rose 1.3 percent in November from the previous month to 5.5 million, the Labor Department said Tuesday. That's below a post-recession peak of 5.8 million in April. Hiring rose 1.1 percent to 5.2 million.

The number of Americans who quit their jobs increased 1.4 percent to nearly 3.1 million, the second-highest total since the recession. Quits are generally a good sign that workers are confident enough to leave their positions for new jobs. Rising quits can also point to higher pay, since most people take new jobs with bigger paychecks.

"The pace of labor market improvement is ebbing," Michael Gregory, deputy chief economist at BMO Capital Markets in Toronto, said in a note before the report. That "is not a 'bad' thing so close to full employment and with wage pressures already on the rise."

Tuesday's figures echo last week's jobs report, which showed a moderate gain of 156,000 new jobs in December and the biggest annual wage gains in more than seven years.

Last week's jobs figure is a net gain after layoffs, quits and retirements are subtracted from overall hiring.

Tuesday's data come from the Job Openings and Labor Turnover survey, or JOLTS, and are more detailed and provide a fuller view of the job market.

With the unemployment rate at 4.7 percent, near a nine-year low, employers are facing pressure to raise pay in order to keep and attract workers.

The number of available jobs is also high, which suggests businesses are having trouble finding the workers they need to fill their open positions. That trend may also force employers to offer bigger paychecks.

Job openings rose in only two industries: Hotels and restaurants and state and local government. Openings were little changed or down slightly in manufacturing, construction, retail, financial services, and education and health.

Information for this article was contributed by Vince Golle and Shobhana Chandra of Bloomberg News and Christopher S. Rugaber of The Associated Press.

Business on 01/11/2017

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