The Index is a survey conducted among a random sample of NFIB members. According to NFIB Director of Research Holley Wade, the survey is largely based on opinion.
“We ask them how they feel about the economy, what their single, most important problems are and also about running their business,” Wade said. “The survey is a tool to use to see month-to-month changes in the small business economy.”
The index increased nearly 1.5 points to 98.3, with six of the ten components rising. Though the increase is promising, the reading has only just returned to the historical average, and still well below the average prior to the Great Recession that began in 2007.
“It appears that the small business sector has finally attained a normal level of activity,” NFIB Chief Economist Bill Dunkelberg stated in a press release. “That being said, improved profit trends accounted for over half the Index gain, a rather unusual but welcomed development.”
Missouri State Director Brad Jones, adds the jump is an indicator small-business owners are thinking positive regarding the economy, but are proceeding with “cautious optimism.” Wade believes this is a result of the nature of the Great Recession.
“They are cautious about the health and the stability of the economy in general,” Wade said. “I think a lot of it has to do with the fact that it hit housing. The value of real estate dropped so quickly, and there are pockets of the country that are still struggling with foreclosures and underwater mortgages.”
This cautious optimism has unfortunately created what the NFIB considers an “uninspiring” economic recovery.
“While the economy has certainly improved over the last six years, it hasn’t improved in a way that we all expected,” Wade said. “Generally, you have a really severe recession and the recovery is equally as swift, and normally that’s been lead by small business owners. Because this economy was so focused in housing, (small business owners) were not a part of the recovery this time.”
Dunkelberg claimed business owners still remain largely pessimistic about a pickup in the economy, however the increase in May’s numbers could suggest changing viewpoints.