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Small business optimism edged up in November amid some hiring

Tuesday, 10 Dec 2013 | 7:30 AM ET
Workers examine swatches in a screen printing workshop. Small manufacturing firms led job creation in November, according to the NFIB.
Heshphoto | Image Source | Getty Images
Workers examine swatches in a screen printing workshop. Small manufacturing firms led job creation in November, according to the NFIB.

U.S. small business optimism edged higher in November—reversing an October drop—as manufacturers and professional services, including architects, doctors and lawyers, led modest gains in newly created Main Street jobs.

The National Federation of Independent Business said Tuesday that its small business optimism Index nudged up 0.9 of a point to 92.5 last month, up from 91.6 for October.

While the headline sentiment number notched up, the November data also suggested many small-business owners and consumers are only getting by more than five years after a deep recession. "People are more hopeful about the jobs picture, but there are some drags on that optimism," said small business owner J. Kelly Conklin.

For example, sales have not strengthened among smaller merchants, with a net negative 8 percent reporting positive sales trends, according to the NFIB report. More upstart entrepreneurs also are pessimistic and expect a weakening economy during the next six months, according to the report.

"There's wasn't a lot of hope expressed in the sentiment measures," NFIB chief economist Bill Dunkelberg told CNBC. Bottom line: "Nobody is going to spend more than they need to keep up with things," Dunkelberg said.

(Read more: How Main Street responded to the govt shutdown)

Jobs picture on Main Street

Seasonally adjusted, small businesses increased employment by 0.05 workers per firm in November, with job creation tempered by upstarts reducing workers. Despite the uptick in jobs, Dunkelberg said 2013 will end with small businesses still employing fewer workers than during the hiring peak experienced in 2007.

Small manufacturing firms led job creation last month with a net 12 percent of them planning to increase employment, followed by a net 10 percent in professional services, according to the NFIB.

(Read more: 10 cool 'Made in USA' gifts)

The small business report mirrors a more positive employment picture as portrayed in other recent reports. On Friday, the government reported 203,000 jobs were added in November, exceeding forecasts. In that labor report, the number of manufacturing jobs was up 27,000, almost triple expectations.

And in another report, private sector job creation surged in November, with ADP on Wednesday reporting 215,000 new jobs, exceeding economists' expectations. Smaller employers led those gains.

More jobs, but less profitability

But jobs gains alone don't reflect what's happening among American workers and employers.

Parsing November jobs report
CNBC's Patti Domm and Moody's Analytics chief economist, Mark Zandi, take a look inside the November jobs report.

Conklin, president of an architectural woodworking business in Bloomfield, N.J., added seven more hires this summer and fall for a total of 15 employees as business improved. But his optimism is cautious, and comes at the expense of lower profits.

Foley-Waite Associates, Conklin's business, makes bids on projects before securing contracts for work. After the Great Recession, he's had to lower his prices to secure work. "There's this lingering expectation that we should be thankful to have the work that we have," Conklin said.

And therein lies the rub about this recovery—that the economy is improving just enough to eke by. Sure Black Friday traffic rose last month, but sales were down, according to the National Retail Federation. Wal-Mart's hottest Black Friday seller was a 29-cent towel.

"This is not a lot of progress for this far into a recovery," NFIB's Dunkelberg said.

And Conklin said: "It will be awhile before we return to pre-2008 profitability."

By CNBC's Heesun Wee. Follow her on Twitter @heesunwee.

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