Optimism edges up for small businesses

While May’s reading is the second highest since the recession started December 2007, matching the May 2012 level, the index does not signal strong economic growth for the sector, the report said. 

Eight of 10 components gained momentum, showing some moderation in pessimism about the economy and future sales, but planned job creation fell 1 point and reported job creation stalled after five months of gains. 

More businesses are being formed than lost, but too many existing firms have not yet started to replace the workers they shed during the recession. 

"The unemployment rate remains in the mid-7s and it is departures from the labor force — not job creation — that is contributing to its decline when it does fall," Dunkelberg said. 

"It’s nice to see confidence not shrinking, but there isn’t much to hang your hat on in this report ... Two good months don’t make a trend, but we can’t have a trend without them, so it’s a start."

Business owners were asked to identify their top business problem — 24 percent cited taxes, 23 percent said regulations and red tape, 16 percent said weak sales and 2 percent reported financing/access to credit.

Nearly half (47 percent) of owners hired or tried to hire in the last three months and 38 percent (81 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions.

In May, only 8 percent of owners characterized the current period as a good time to expand, which is up 4 points from a very weak reading in April, but still a poor showing when compared to an average value of 16 percent pre-recession. 

The net percent of owners expecting better business conditions in the next six months was a net negative 5 percent, 10 points better than April and 23 points better than March.