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Economy in Brief

Small Business Optimism Backpedaled
by Tom Moeller November 9, 2004

The October Small Business Optimism Index published by the National Federation of Independent Business (NFIB) fell 0.6%, reversed some of the prior month's 1.6% rise and continued the sideways trend of 2004.

During the last ten years there has been a 74% correlation between the level of the NFIB index and the two quarter change in real GDP.

The percentage of firms expecting the economy to improve fell sharply to 30%, the lowest since June, and the percentage of firms reporting that now is a good time to expand fell to 20%, a figure well off the highs of 24-25.

Despite the lost enthusiasm, the percent of firms planning to raise employment firmed slightly and the percentage of firms with one or more jobs open rose to the highest since July (23%). During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.

The percentage of firms raising average selling prices rose slightly to 20%.

About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

Nat'l Federation of Independent Business Oct Sept Y/Y 2003 2002 2001
Small Business Optimism Index (1986=100) 103.9 104.5 -0.1% 101.3 101.2 98.4
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