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Economy in Brief

U.S. Small Business Optimism Wanes
by Tom Moeller  October 10, 2017

The National Federation of Independent Business reported that its Small Business Optimism Index declined to 103.0 during September following little change during August. In was the lowest level of confidence since November, but remained up y/y.

A greatly lessened 17% of firms reported that now was a good time to expand the business and a lower 15% of firms reported that they were expecting higher real sales. Both of these indications were the weakest since November. A much weaker 27% of firms planed to make capital outlays in the next 3-to-6 months. Showing a lesser decline was the percentage of firms which were expecting the economy to improve. Moving higher was the percentage of firms indicating that credit was harder to get.

On the labor front, an improved 19% of firms planned to raise employment, equaling the most since November 2006. Finding employees was a little easier m/m as a lessened 49% of firms indicated they had few or no qualified candidates to fill job openings, but that remained up from 46% during all of last year. Twenty-five percent of firms raised worker compensation. That's below a high of 30% in January, but up from 24% three months ago. A higher 18% of firms planned to raise compensation in the next three months.

On the inflation front, a lessened six percent of firms actually raised average selling prices last month following strength in July and August. The percentage of firms planning to raise average selling prices also eased to 19% and has moved sideways this year.

A slightly higher 21% of firms indicated that taxes were the single most important problem. A sharply higher 19% felt challenged by the quality of labor, equaling the most since 2001. A steady 16% reported that government requirements were the largest single problem. A greatly lessened seven of firms reported insurance cost & availability as the largest hurdle, but a slightly higher eleven percent of firms indicated that poor sales were the largest single problem. A strengthened eight percent reported competition from large businesses as the largest problem. A greatly lessened five percent felt that cost of labor was the largest single problem. Inflation was reported as the largest problem by a low two percent of respondents.

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 (SA, Net % of Firms) Sep Aug Jul Sep'16 2016 2015 2014
Small Business Optimism Index (1986=100) 103.0 105.3 105.2 94.1 95.3 96.1 95.6
Firms Expecting Economy To Improve 31 37 37 0 -5 -5 -5
Firms Expecting Higher Real Sales 15 27 22 4 5 8 11
Firms Reporting Now is a Good Time To Expand the Business 17 27 23 7 10 12 10
Firms Planning to Increase Employment 19 18 19 10 11 12 10
Firms With Few or No Qualified Applicants For Job Openings (%) 49 52 52 48 46 46 43
Firms Reporting That Credit Was Harder To Get 6 3 3 5 5 4 6
Firms Raising Average Selling Prices 6 9 8 -1 0 2 8
Firms Raising Worker Compensation 25 28 27 22 24 23 21
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