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Economy in Brief

Small Business Optimism Up, Hiring Firm
by Tom Moeller March 15, 2006

The February index of small business optimism from the National Federation of Independent Business (NFIB) reversed all the prior month's decline and rose 0.4%. The index has moved generally sideways since last Fall.

The percentage with one or more job openings held at the high level of 26% reached in January. That is the highest since 2001.In addition, the percentage of firms planning to increase employment at 16% was down just one point from January but remained higher than the averages of the last five years.

The percent planning to raise capital expenditures rose to 35%, the highest level in nearly a year. Despite these plans the percent of firms expecting the economy to improve slid to just 3%, the lowest level since 2001.

During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.

The percentage of firms planning to raise average selling prices slipped to 27%, the same as during all of last year but the percentage of firms actually raising average selling prices rose to 23%, a bit higher than last year. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.

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 Feb Jan Y/Y 2005 2004 2003
Small Business Optimism Index (1986=100) 101.5 101.1 -2.0% 101.6 104.6 101.3
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