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Economy in Brief

U.S. Small Business Optimism Improves to Five-Month High, Despite a Labor Shortage
by Tom Moeller  June 9, 2015

The National Federation of Independent Business reported that its Small Business Optimism Index increased to 98.3 during May from an unrevised 96.9 in April. The reading was the highest since December.

The percentage of firms expecting the economy to improve rose to -3 but remained down from the November high of +13%. Gaining slightly to 12% was the percentage planning to increase employment. That remained below, however, December's high of 15%. Discouragement about the labor supply continued as the percent with positions not able to be filled right now jumped to 29%, a recovery high. The percentage with few or no qualified applicants for job positions rose m/m to 47%, a three-month high. The percentage indicating now was a good time to expand the business recovered to 14%, the highest level this year.

The percentage expecting higher real sales in six months fell, however, to 7%, the most pessimistic reading since September. The percentage indicating that credit was harder to get declined to a recovery low of 3%, down from the 2009 high of 16%. The percentage planning capital expenditures in the next 3 to 6 months slipped m/m to 25% and remained below December's recovery high of 29%.

On the pricing front, 6% of firms were raising average selling prices last month, the most since October. The percentage planning price increases, however, held steady at 17%. Labor's pricing power increased as the percentage of firms raising worker compensation gained to 25%, matching the highest level since early 2008, up from none early in the recovery. The percentage planning to raise compensation held steady m/m at 14%, up from none at the end of the recession.

The most important problems faced by small business were government requirements (23%), taxes (23%), quality of labor (13%), poor sales (11%), insurance cost & availability (7%), competition from large businesses (7%), cost of labor (6%), inflation (3%) 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.

National Federation of Independent Business May Apr Mar  May '14 2014 2013 2012
Small Business Optimism Index (SA, 1986=100) 98.3 96.9 95.2 96.6 95.6 92.4 92.2
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 7 10 13 15 11 4 2
Firms Expecting Economy To Improve (SA, Net %) -3 -6 -7 0 -5 -15 -9
Firms Planning to Increase Employment (SA, Net %) 12 11 10 10 10 6 4
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 47 44 42 46 43 39 35
Firms Reporting That Credit Was Harder To Get (SA, Net %) 3 4 5 6 6 6 8
Firms Raising Average Selling Prices (SA, Net %) 6 2 2 12 8 2 4
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