Despite rising employment costs, the nation's small-business owners are feeling better about the economy and are outpacing larger companies in job growth. Here's a look at this week's economic developments and how they may affect your business.

Owner Optimism Rebounds

Following declines in recent months, more small-business owners had a positive outlook on the economy in July, with many planning to boost capital spending, Discover reported Monday.

In a survey of 1,000 owners nationwide, 41 percent said economic conditions were improving, up from 34 percent in June, while 39 percent rated the economy as "excellent" or "good," up from 38 percent, the report said.

Another 38 percent said they were planning to increase spending on business development, up from 35 percent.

"Small-business owners seem to be more cautious about the larger economy than they were in the spring, but confidence in their own operations has rebounded," Sastry Rachakonda, director of Discover's small-business credit card, said in a statement

Small Businesses Fuel Job Growth

Small businesses continued to drive U.S. employment growth, accounting for 44,000 of a total 48,000 net new jobs in July, Roseland, N.J.-based employment services firm Automatic Data Processing reported Wednesday.

By contrast, midsize businesses added just 17,000 new jobs in July, while larger businesses shed 13,000, the report said. All new jobs created last month were created in the service sector. Businesses of every size in the goods-producing sector cut jobs.

ADP defines a small business as having fewer than 50 employees.

Employment Costs Rise

Following sharper gains earlier this year, private-sector wages and salaries rose 0.8 percent in the second quarter, the Labor Department reported Tuesday.

The declines were offset by gains in employee-benefit costs, which jumped by 1.1 percent, up from 0.3 percent in the first quarter, the report said.

Together, the gains pushed total compensation costs up by 0.9 percent, compared to 0.6 percent during the previous quarter. In the past year, compensation costs have grown by 3.1 percent.

Wage and salary costs account for about 70 percent of total employment compensation costs.

Private wage and salary disbursements rose by $29.1 billion in June, up from $23.4 billion in May, the Labor Department reported Tuesday. In total, personal income rose by 0.4 percent, while spending rose by 0.1 percent, the report said.

Pending Home Sales Up

After months of declines, pending home sales jumped by 5 percent in June, the largest gain in more than three years, the National Association of Realtors reported Wednesday.

Pending home sales are based on signed contracts for sales that have yet to close.

Despite the gains, pending home sales were 8.6 percent below June 2006.

"It's too early to say if home sales have already passed bottom," Lawrence Yun, the trade group's chief economist, said in a statement. He said further declines would likely be modest, as a result of pent-up demand.

Still, residential construction spending continued to decline in June, dropping 0.7 percent from May to a seasonally adjusted annual rate of $544.3 billion, the Commerce Department reported Tuesday.

Gas Prices Fall

Average gas prices fell by 8.2 cents to $2.876 per gallon as of July 30, marking the second straight week of declines and the lowest prices in three months, the Energy Information Administration reported Wednesday.

Lower prices were reported in every region, including a 13.6 cent decline in the Midwest to $284.4 per gallon. Over the last two weeks, prices in the Midwest have fallen by a total of 32.4 cents. Prices in California fell 5.8 cents to $3.06 per gallon, the only region where prices remained above the $3 mark, the report said.

Jobless Claims Up

The number of new claims for unemployment benefits rose by 4,000 to 307,000 in the week ending July 28, the Labor Department reported Thursday.

The seasonally adjusted insured unemployment rate over the previous week was unchanged at 1.9 percent, with 2.525 million people filing claims for benefits.

The largest gains last week were in Illinois, Kentucky, and Kansas, while the largest declines were in North Carolina, Pennsylvania, and New York.