Small business owners are feeling more optimistic as 2013 begins after the Wells Fargo/Gallup Small Business Index dropped to the most pessimistic level in two years in November.

The January index improved 20 points to positive 9 in January 2013, up from negative 11 in November 2012, indicating an improvement in optimism since the November elections. Key drivers of this improvement in the survey, conducted Jan. 7-11, 2013, include increased business owner optimism about revenues, capital spending, and jobs over the past 12 months and more optimism about their overall financial situation, revenues, cash flow, and jobs over the next 12 months. A year ago, in January 2012, the index was at positive 15.

While optimism improved from the fourth quarter, the survey paints a mixed picture with respect to jobs and hiring. More business owners (71 percent) expect the number of jobs at their companies to stay the same over the next 12 months, and business owners planning to add jobs during the same period remained unchanged at 17 percent. Among those who hired new employees the past 12 months, 35 percent of owners are hiring fewer employees than they need, up from 29 percent in January 2012, but below the 42 percent of November 2010.

“At a time when news headlines report mixed economic news and uncertainty in Washington, our survey shows the volatility of business owner sentiment today,” said Doug Case, small business segment manager for Wells Fargo, in a statement. “Business owners are feeling a bit more positive at the beginning of the year, but they also express concern about the operating environment that could impact future business decisions, such as hiring new employees.”

This quarter, the Index survey included additional questions on hiring and jobs. When small business owners who are not hiring were asked for the reason, the top responses were:

• Don’t need additional employees at this time (81 percent)
• Worried about the revenues and sales to justify new employees (74 percent)
• Concerned about the status of the U.S. economy (66 percent)
• Worried about the potential cost of health care (61 percent)

The number of small business owners saying they are not hiring for fear they may no longer be in business in 12 months increased to 30 percent in January, up from 24 percent from one year ago.

The top reasons small business owners said they are hiring include increased consumer or business demand (70 percent) and expanding their business operations (68 percent).

When looking for new employees, 63 percent of the small business owners polled report using word-of-mouth and 47 percent employee referrals. Twenty-three percent of owners say it is very difficult and another 30 percent say it is somewhat difficult to find qualified employees—about the same as in January 2012. Twenty-seven percent of owners say the difficulty of finding qualified employees has hurt their business over the past 12 months, up from 21 percent a year ago.

Forty percent of owners said they would look for temporary or contract workers when hiring while 36 percent say they would seek part-time employees, and 22 percent full-time employees. When they can’t afford to hire new employees, 28 percent of owners say they turn to their spouse for unpaid help, 14 percent turn to their children, 13 percent to a friend, 7 percent to another relative, and 6 percent to a student.