Small Business Optimism Increases

As 2010 nears its midpoint, a new survey shows small business owners are becoming more optimistic about their future prospects. According to the Wells Fargo/Gallup Small Business Index survey, respondents reported improving sales and economic conditions at the start of the second quarter. “As consumer and business spending appeared to pick up pace, this bolstered small business owners' optimism around their current situation,” said Scott Anderson, Wells Fargo senior economist.

In April, the survey’s Small Business Index optimism score rose by five points compared to January, yielding a 10-point improvement compared to July of 2009. A separate measure, called the Present Situation Index, also improved in April, jumping seven points. The Present Situation Index is based on six variables, including capital allocation spending and credit availability. “In our latest survey, we see more small business owners describing their cash flows and current financial situation as good and higher percentages seeing an increase in revenues over the last 12 months,” Anderson said.

While most index factors improved consistently throughout the first quarter, the survey shows job hiring still lagged behind. According to survey data, 53% of business owners have recently maintained current staffing levels, only hiring as many employees as needed. Additionally, 67% of business owners say they have not increased weekly employee hours, with nearly 20% saying they continue to decrease hours. Business owners cited several reasons for not hiring more workers. Most notably, 65% of respondents said they had concerns about the potential cost of health care.

“Small businesses are critical to the health and strength of our economy, as they employ about half of the private sector workforce and create more than 60% of net new jobs annually in the U.S.,” said Doug Case, small business segment manager at Wells Fargo. “This has been a challenging period for small businesses. They are looking for assurance of an economic rebound before staffing for growth.”