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Economy in Brief

U.S. Small Business Optimism Slips in December But Trend Improvement Intact
by Tom Moeller  January 11, 2011

Following several months of upward movement, small business optimism slipped last month. Nevertheless, the National Federation of Independent Business indicated that their index of small business optimism, at 92.6 in December versus 93.3 in November, was near the September 2008 high. Last year as a whole optimism improved a moderate 3.7% from 2009. The largest slip last month was in the percent of firms expecting the economy to improve. Nevertheless, the percentage expecting higher real sales in six months rose to its highest since late-2007. In addition, the percentage expecting to increase employment rose to its highest since 2008. Finally, though they slipped last month, expectations that credit conditions would ease were also the best since 2008.

The number of firms with a job opening now rose to its highest since December 2008 and the percentage of firms planning to add jobs surged. Also, the percent expecting to make a capital expenditure in the next six months increased. Finally, the percentage of firms planning to raise prices also rose to its highest since 2008, while the percentage of firms currently raising prices remained improved. In tandem, worker compensation over the past 3-6 months is up.

The most important problems faced by small business were poor sales (33%), taxes (19%), government requirements (13%), insurance cost and availability (9%), competition from large businesses (5%), financial & interest rates (5%), inflation (4%) and quality of labor (4%). The percent with few or no qualified job applicants for job openings remained lower at 28% though that still was up from its 2009 low of 21% .

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The NFIB figures can be found in Haver's SURVEYS database.

Nat'l Federation of Independent Business Dec. Nov. Oct. Dec'09 2010 2009 2008
Small Business Optimism Index(SA,1986=100) 92.6 93.2 91.7 88.0 89.9 86.7 89.8
 Firms Expecting Economy To Improve (Net %) 9 16 8 2 -1 -0 -10
 Firms With One or More Job Openings (Net %) 13 9 10 10 10 9 18
 Firms Reporting That Credit Was Harder To Get(Net %) 12 11 11 15 13 14 9
 Firms Raising Avg. Selling Prices (Net %) -5 -4 -5 -22 -12 -20 17
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