The confidence of a U.S. small business has bounced back in a major way from a two-year low in April amid progressing with labor market optimism, supporting views on economic expansion which looks to regain momentum during the second quarter. The National Federation of Independent Business (NFIB) stated this past Tuesday its small business optimism index went up about 1.0 point to a reading of 93.6 in the past 30 days. It was the first spike in the index this year. The index hit a two-year low back in March. Even though April’s jump, it remained under the 100 reading back in December of 2014 and its 42-year average of 98. This past month’s increase is in sync with expectations that the economy will pick up wind in the second quarter after gross domestic product growth slowed to a 0.5 percent annualized rate in the first three months of the year.
Growth was hindered by the continuing effects of the dollar’s rally between June 2014 and December 2015, weak global demand, an inventory overhang as well as low oil prices, which have damaged profits in the energy sector. Five factors of the NFIB index saw a rise within the last 30 days while four were not changed and one was declined. Labor market measures increased, with the share of small business owners reporting hiring gaining five points to 53 percent, though many stated they could not obtain suitable workers for the necessary positions. There was also an increase in the number of owners getting ready to hire workers, with most of the job creation in construction, manufacturing and professional services. While there was an improvement in the share of small business owners reporting higher sales, an equal number stated sales were weak. There was a progressive advancement in the share of owners reporting an increase in inventories, although the share of owners preparing for capital outlays over the next three to six months was not changed.