November 17, 1997

SMALL BIZ IS SINGING "DON'T WORRY, BE HAPPY"

Edited by Douglas Harbrecht

During the country's six-year economic run-up, small businesses have certainly been optimistic. But they're downright giddy now. The latest Small Business Optimism Index, issued Nov. 14 by the National Federation of Independent Business, surveyed 1,554 small-business owners and found the group "extraordinarily" positive about both the future of their own companies and the economy at large.

Their cheery outlook extended across almost all key economic indicators. For example, 37% of those polled said they plan to make a capital investment in the next six months, up three percentage points from the last survey. In October alone, 17% of small businesses added new jobs, and from August to October, 30% raised average employee compensation. Assessing the national economy, 26% of survey-takers said the climate during the next two quarters should make it a good time to expand.

"All of these indicators are not at record highs, but they are very high levels," explains Cliff Waldman, an NFIB economist. "What's extraordinary is that they're all happening at the same time. We didn't see that in the 1980s."

Owners were not without some worries, however -- namely, a growing labor shortage. A near-record 28% reported difficulty in filling at least one post, and 16% listed "finding qualified labor" as their biggest business concern. Waldman speculates that the labor shortage might eventually hobble the current small-business expansion. For now, though, small companies are using technology to help make up any manpower deficits. They "have really done a good job of catching up [technologically] with the larger corporations," he adds.

Most important, Waldman says, the survey found small-business owners have become less fearful that the nation will fall into a cyclical economic downturn. He concludes: "They finally believe strong growth can follow strong growth."

By Dennis Berman in New York