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Economy in Brief

U.S. Small Businesses Optimism Dampened By Many Uncertainties
by Tom Moeller  March 11, 2014

The National Federation of Independent Business reported that its Small Business Optimism Index declined sharply to 91.4 during February from 94.1 in January. The latest figure was the lowest since March of last year and was down 3.2% from the peak nine months ago.

Pessimism took hold as a negative 19% of firms, on balance, expected the economy to improve, the most in three months. Just 6% of firms thought that now was a good time to expand the business. Moreover, a reduced and low 3% expected higher real sales in six months. The shortage of qualified labor was seen as stable and high as 22 percent of firms had positions they were not able to fill, nearly the most since before the recession. A lower 7% were planning to increase employment, the least since October. A greater 40% of firms found few or no qualified applicants for job openings. Longer term confidence in the economy's future was evident as a greater 25% of firms were planning capital expenditures in the next 3-6 months, still nearly the most of the economic recovery.

A heightened 23% of firms planned to raise average selling prices in the future but just 1 percent were raising them now. An increased 14% planned to increase worker compensation, the most of the economic recovery.

The most important problems faced by small business were government requirements (21%), taxes (a sharply lower 19%), poor sales (16%), quality of labor (a sharply higher 11%), insurance cost & availability (9%), competition from large businesses (7%), cost of labor (5%), inflation (2%) and financial & interest rates (2%).

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's SURVEYS database.

Private Credit and Public Debt in Financial Crises from the Federal Reserve Bank of San Francisco is available here.

National Federation of Independent Business Feb Jan Dec Jan'13 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 91.4 94.1 93.9 90.8 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (Net %) 3 15 8 1 4 2 3
Firms Expecting Economy To Improve (Net %) -19 -11 -11 -28 -15 -9 -9
Firms Planning to Increase Employment (Net %) 7 12 8 4 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (Net %) 40 38 38 34 39 35 32
Firms Reporting That Credit Was Harder To Get (Net %) 8 6 7 7 6 8 10
Firms Raising Average Selling Prices (Net %) 1 2 -1 2 2 4 5
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