U.S small businesses optimistic (just about) for 2006

2005

The majority of small business owners in the U.S expect to hire more workers next year, and pay them more money, despite the fact that fewer predict their businesses will grow faster in 2006 than they did this year.

The Administaff business confidence survey found half new business owners and managers polled said they intended to invest more in their businesses in 2006 compared with this year, and most planned to increase both salaries and hiring.

More than two-thirds – 68 per cent – expected to experience more growth in the coming year than in 2005.

But this compared with 78 per cent polled in January who said the same thing about 2005.

While most business owners felt the outlook was bright for 2006, they were also keeping a watchful eye on the economy, said the survey.

More than half – 54 per cent – reported they were "optimistic" about the economy in the coming year, while about a third said they were undecided.

"Based on employment data we're seeing through the third quarter, plus the outlook that business owners are expressing for 2006, business sentiment seems to range from mostly strong to cautiously optimistic," said Paul J. Sarvadi, chairman and chief executive officer of Administaff.

A total of 64 per cent of companies polled planned to increase salaries and wages and fewer than two per cent expected salaries to fall, the survey reported.

Two thirds intended to add employees, 73 per cent thought overtime was likely to remain the same and half predicted an increase in capital spending. More than two-thirds – 77 per cent – said they planned to take steps to boost employee retention, showing that keeping talented workers was becoming more of a priority.

Yet there were also signs the optimism could be fragile, or easily dented by an unexpected event, such as another terror attack or devastating natural disaster.

"We are optimistic in a guarded way," one business owner polled told Administaff.

"We are concerned that, although we support the country's efforts against terror, something may happen to hurt consumer confidence, or higher interest rates and/or energy costs could stagnate the economy," he added.