Once again confidence abounds among small business owners, as reflected in a gauge of optimism produced by the National Federation of Independent Business (NFIB). The survey showed the second highest level of optimism since the NFIB began tracking data in 1983, and has reached the highest level in 34 years. Also according to NFIB statistics, small business Optimism has recorded 16 consecutive months of historically high readings.

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Small business owners are again showing their positive reaction to the Trump tax cuts and the lowering of regulatory hurdles. “Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes,” said NFIB President and CEO Juanita Duggan. “For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase.” If you drill down a little further into the survey you will find some interesting perceptions, including compensation increases at a net 35 percent; earnings trends at a net 3 percent; sales trends are at the highest level since 1995.

A couple of things jump out at you from the chart above. The issue of finding quality labor in an historically low unemployment environment is readily noticed. Those surveyed said that current job openings are up 35 percent from the prior year. Depending upon where you are geographically, this number can be either more or less pronounced. Other surveys have also shown that finding employees is now the most difficult aspect of running a business. As such, employers are having to raise pay, thus possibly leading to wage inflation. This was reflected in the May CPI release, showing that the consumer price index rose 2.8 percent from a year earlier. U.S. inflation accelerated in May to the fastest pace in more than six years, reinforcing the Federal Reserve’s outlook for gradual interest rate hikes while eroding wage gains that remain tepid despite an 18 year low in unemployment.

The data goes on to suggest that now is a good time to expand business, which goes hand in hand with the need to increase the number of employees. The question remains whether qualified workers can be found, and also what level of wage increase will be needed to bring new workers on board. Another takeaway that is implied in the data suggests that the fuss of tariffs and trade wars has had a marginal effect on small business.

The statistical surveys of small business owners garner attention as this segment of the economy accounts for roughly half of U.S. GDP as well as American employment. No doubt that the Chairman Powell led Fed will take these numbers into account as they look to raise the federal funds rate for the 6th time in 18 months. These figures will also be noticed by President Trump, providing him more ammunition in his summit talks with North Korea. The hermit nation has now seen Singapore, and what it is capable of in a few short years. The Marxist model of economic development used in China may be the blueprint for the future of North Korea. Trump can expound on how an entrepreneurial economy can get you to prosperity, while a dictatorial one will only lead them further down the path of ruin.