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Economy in Brief

U.S. Small Businesses Optimism Improves During August
by Tom Moeller  September 8, 2020

• NFIB Small Business Optimism Index retraces most of July's decline.

• Employment & pricing conditions improve.

• Economy & sales readings soften.

The National Federation of Independent Business (NFIB) Small Business Optimism Index rebounded to 100.2 in August after falling to 98.8 in July. The Small Business Uncertainty Index increased to 90 from 88 in July and 75 in April, but remained below 92 in March.

Plans to increase employment occurred amongst a net 21% of respondents, the most in six months and up from April's low of one percent. An increased 46% of respondents found few or no qualified candidates to fill job openings in August, the most since March and up from a low of 37% in May. A higher 12% planned to expand the business, a figure stable for two months.

To the downside in August, a lessened 24% of respondents felt that the economy would improve, down from 39% in June. Just three percent of firms expected higher real sales, the least in three months after declines were registered this spring. Credit was harder to get by a diminished one percent of respondents, down from April's high of four percent.

Pricing power improved. An increased one percent of firms raised prices, the first positive reading in five months and up from 18% who lowered prices in April. A sharply higher 16% were planning to raise prices in August, the most in six months. An increased 18% of firms raised worker compensation while a steady 14% planned to do so over the next three months.

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) Aug Jul Jun  Aug'19 2019 2018 2017
Small Business Optimism Index (1986=100) 100.2 98.8 100.6 103.1 103.0 106.7 104.9
Firms Expecting Economy to Improve 24 25 39 12 13 32 39
Firms Expecting Higher Real Sales 3 5 13 17 18 26 23
Firms Reporting Now Is a Good Time to Expand the Business 12 11 13 26 25 30 23
Firms Planning to Increase Employment 21 18 16 20 19 21 18
Firms With Few or No Qualified Applicants for Job Openings (%) 46 44 43 57 52 51 49
Firms Reporting that Credit Was Harder to Get 1 2 3 1 4 4 4
Firms Raising Average Selling Prices 1 -2 -5 11 13 15 7
Firms Raising Worker Compensation 18 15 14 29 31 33 27
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