September 15, 2004--A new study by the National Federation of Independent Business shows that unemployment could begin to drop over the next few months as small business owners begin to snap up new employees.

In its Small Business Economic Trends report released on Tuesday, the NFIB found that 19% of the firms polled plan to add workers in the near future. In fact, the study showed that job creation was already strong in August as an average of 0.3 employees were added per responding business, a strong indication that optimism about new hires is climbing towards pre-recession levels, when up to 22% of companies planned to hire new employees.

"This is a very strong reading," said William Dunkelberg, chief economist for the NFIB. "It's within shouting distance of the record reached in 2000."

Construction and manufacturing firms were especially optimistic about hiring in the coming months. On a regional basis, the South Atlantic states reported the most aggressive job-creation plans, though the study took place prior to the string of hurricanes that continue to batter the area.

Other good news was that 23% of the 503 companies surveyed reported gains in their profit levels, while 32% of respondents expect business conditions to improve over the next six months.

On the flip side, overall optimism among small businesses dipped to 102.9 from July's peak of 105.9 as eight of the 10 components tracked in the study fell in the past month. Dunkelberg urged caution in interpreting the result by saying that August's figure marked the 17th straight month that the index topped 100.

"With the Optimism Index near a record high, it's hard to post continued gains," he noted, adding that "although there are a number of uncertainties facing financial markets, such as energy prices, the election and the threat of terrorist disruptions, the economy is looking quite solid."