2017 set the all-time record high for small business optimism in the 45-year history of the National Federation of Independent Business (NFIB) Index of Small Business Optimism released today (1.9.2o17) (PDF available) The optimism index for December was 104.9, slightly lower than the near-record November report but the annual ranking was the strongest year in the history of the survey.

104.8 | The annual optimism index for the entire year of 2017
104.6 | The previous record high was 104.6 set in 2004

“We’ve been doing this research for nearly half a century, longer than anyone else, and I’ve never seen anything like 2017,” said NFIB Chief Economist Bill Dunkelberg. “The 2016 election was like a dam breaking. Small business owners were waiting for better policies from Washington, suddenly they got them, and the engine of the economy roared back to life.”

According to NFIB, the driver of record optimism in 2017 was the expectation of better economic policies from Washington. “The lesson of 2017 is that better policies make for better economic results,” said NFIB CEO Juanita Duggan. “The evidence is overwhelming that small business owners pay close attention to Washington, and that federal policies affect their decisions on whether to hire, whether to invest, whether to grow inventory, and whether to seek capital.”

Two of the December components posted gains, five declined, and three remained unchanged. Moving the Index moderately lower were declines in Expected Better Business Conditions (11-point decline) which tends to fluctuate sharply and Inventory Plans (8-point decline). However, small business owners were bedeviled by a labor shortage in 2017 that grew more intense as optimism rose. The monthly NFIB Jobs Report last week showed that problem reaching record levels.

“There’s a critical shortage of qualified workers and it’s becoming a real cost driver for small businesses,” said Dunkelberg. “They are raising compensation for workers in order to attract and keep good employees, but that’s a positive indicator for the overall economy.”