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Small business confidence falls; labor indicators weak

Baristas Jennifer Greiner (L) and Whitney Carson prepare for Friday's grand opening at the Lantern Coffee Company in Williston, North Dakota, February 5, 2015. REUTERS/Ernest Scheyder

WASHINGTON (Reuters) - Small business confidence fell in March as hiring and capital spending plans weakened, adding to signs that economic growth braked sharply in the first quarter.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index dropped 2.8 points to 95.2 last month. The decline in the NFIB is in line with softer data on employment growth and manufacturing.

Economic growth in recent months has been dampened by harsh winter weather as well as a now-settled labor dispute at the normally busy West Coast ports, softer global demand and a stronger dollar.

The economy is estimated to have expanded at a sub-1.5 percent annual rate in the first quarter after growing at a 2.2 percent pace in the final three months of 2014.

"Not a recession scenario overall for sure, but there is not much growth energy in the economy," said NFIB chief economist William Dunkelberg.

All 10 components of the index fell last month, with sharp declines in labor market indicators.

The share of small business owners saying they could not fill open positions dropped five points last month from a near nine-month high in February, which could see tepid wage growth persist for a while.

That accounted for 15 percent of the decline in the NFIB index last month. In addition, plans to create new jobs fell two points. Dunkelberg said this suggested a softer job market in the second quarter of 2015.

The government reported early this month that nonfarm payrolls increased only 126,000 in March, ending 12 straight months of job gains above 200,000.

The NFIB survey found a two point decline in capital spending plans. The share of small businesses increasing inventories fell three points last month to just one percent.

Businesses were downbeat on prospects for the next six months and the outlook for sales and earnings.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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