New York - December 16, 2010 - The headline looks good yet underlying the relative optimism are the hard realities of tepid job creation, weak customer activity, and mild deflationary pressures. The confidence index for small companies is trending higher, though it's still below pre-recession levels.
Here are the key numbers from The National Federation of Independent Business: NFIB's optimism index increased to 93.2, the highest since December 2007, from an October reading of 91.7. Seven of the index's 10 components rose and three declined. The measure averaged 100.7 during the previous expansion.
The graph gives us a historical perspective, showing a deeply depressed small business community since the start of 2008. Even the latest reading only just reached the three previously lowest points of the past 25 years -- in 1991, 1993, and 2003.If the U.S. economy is going to accelerate job growth, it requires a big contribution from small companies. Small businesses with up to 500 employees represent more than 99% of all U.S. employers and have created 65% of all new jobs in the past 17 years, according to the U.S. Small Business Administration.
The good news is that small firms are moving in the right direction and there are positive signs for growth. "Plans to hire, make capital outlays and invest in inventories all rose, albeit from historically low levels," said William Dunkelberg, NFIB's chief economist.
The increasing optimism is reflected in rising share prices for small companies. The Russell Microcap Index has risen 30% since Aug. 31, compared with an 18% gain in the S&P 500 Index. And with January approaching, momentum in the broad U.S. economy should spur further activity in smaller stocks.
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Josh Levine has 25 years of senior-level experience in analyzing technology trends and investing in top-performing micro- and small-cap stocks. He excels at assessing management teams and evaluating new innovations and their impact on corporate valuations.
In 2002 he joined independent investment-research boutique ChangeWave Research, where he was editor of ChangeWave MicroCap Investor since 2004, becoming Levine's MicroCap Investor in 2010. He has been editor of the flagship ChangeWave Investing since 2007.
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