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Economy in Brief

U.S. Small Business Optimism Index Remains Steady
by Tom Moeller  November 10, 2015

The National Federation of Independent Business reported that its Small Business Optimism Index remained unchanged during October following a slight uptick in September. The latest figure remained below the high of 100.4 in December. According to the NFIB, the October level also remained below the 42-year average of 98 and was consistent with economic growth of 2.5%.

As for business activity, 11% of firms reported that now was a good time to expand the business, down from 12% in September. The reading remained in the range of the last twelve months. The percentage of firms expecting the economy to improve also held steady m/m and has trended sideways this year. The percentage of firms expecting higher real sales in six months improved m/m but remained down sharply versus last year.

A shortage of labor was in evidence. Forty eight percent found few or no qualified candidates to fill job openings, equaling the eight-year high. A lessened 27% of firms had positions they were not able to fill right now. A smaller 11% of firms expected to increase employment, down from a 15% high at the end of last year. A diminished net 21% of firms raised worker compensation over the last twelve months, but 17% were expecting to raise it in the next three months, the most since December.

Small businesses ability to improve pricing remained limited. Only 2% of firms were raising prices, down from 14% in July of last year. Expectations about the ability to raise prices collapsed. Fourteen percent of firms were planning to raise prices, down from 20% during all of last year.

Credit remained readily available as just 3% reported that it was difficult to get. Thirty percent of firms felt satisfied, however, that their borrowing needs had been filled in the last three months, down from 35% March.

A stable 22% reported government requirements as the largest single problem and 21% were troubled most by taxes, lower than a high of 27% in December. A lessened 13% were challenged by the quality of labor. A slightly increased 12% indicated poor sales as their biggest problem; 7 percent reported competition from large businesses and 8 percent reported insurance cost and availability. A higher 6% reported the cost of labor was a big problem and inflation was indicated by only 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 Oct Sep Aug Oct'14 2014 2013 2012
Small Business Optimism Index (SA, 1986=100) 96.1 96.1 95.9 96.1 95.6 92.4 92.2
Firms Reporting Now is a Good Time To Expand the Business 13 12 10 11 10 7 7
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 4 1 7 9 11 4 2
Firms Expecting Economy To Improve (SA, Net %) -4 -4 -6 -3 -5 -15 -9
Firms Planning to Increase Employment (SA, Net %) 11 12 13 10 10 6 4
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 48 45 48 45 43 39 35
Firms Reporting That Credit Was Harder To Get (SA, Net %) 3 4 4 4 6 6 8
Firms Raising Average Selling Prices (SA, Net %) 2 1 1 8 8 2 4
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