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Economy in Brief

U.S. Small Business Optimism Fell Further
by Tom Moeller August 12, 2008

Small business optimism, according to the National Federation of Independent Business (NFIB), fell another 1.1% last month after having been roughly unchanged in June. The index was near the low in 1975 which was its second lowest level on record.

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 respondents with one or more job openings revered most of the June improvement while the percent expecting the economy to improve rose slightly. Seventeen percent of respondents had one or more job openings. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls. The percentage planning to raise employment was level m/m at 5%, near the least since early-2003.

Six percent of respondents thought that now was a good time to expand the business, the least since 1982, and 37% of respondents expected lower earnings, a record low.

The percentage of firms actually raising prices shot up to 32%, the highest level since 1981. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also surged to 38%, also its highest since 1981.

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

The NFIB figures can be found in Haver's SURVEYS database.

Nat'l Federation of Independent Business July June Y/Y 2007 2006 2005
Small Business Optimism Index (1986=100) 88.2 89.2 -9.6% 96.7 98.9 101.6
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