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Economy in Brief

U.S. Small Business Optimism Holds Steady During October
by Tom Moeller  November 10, 2020

• Stability in NFIB Small Business Optimism follows strong gains.

• Employment readings ease.

• Pricing gauges strengthen.

The National Federation of Independent Business' (NFIB) Small Business Optimism Index held steady at 104.0 during October. It remained the highest level since February, up from the April low of 90.9.

A lessened net 27% of respondents felt that the economy would improved, down from 39% in June. A diminished net 18% of firms of firms planned to raise employment, the least in three months. A lessened 48% of firms found few or no qualified candidates to fill job openings. To the upside, a net 11% of firms expected higher real sales, the most since June. A steady net 13% thought that now was a good time to expand the business, up from three percent in April. Earnings trends improved greatly as the readings so far this quarter have risen to -3 from -12, up from June's -35.

Credit was a bit harder to get by a still low three percent of respondents, down from April's high of four percent.

Pricing power improved again. An increased net 15% of firms raised prices, the strongest reading since January and up from 18% who lowered prices in April. A net higher 20% were planning to raise prices in October, the most since February. A steady net 23% of firms raised worker compensation while a higher 18% planned to do so over the next three months, up from seven percent six months ago.

The most important issues for small businesses were the quality of labor (22%), taxes (17%) and poor sales (13%). The cost of labor troubled a lessened eight percent of respondents while competition from large businesses troubled a steady nine percent.

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) Oct Sep Aug Oct'19 2019 2018 2017
Small Business Optimism Index (1986=100) 104.0 104.0 100.2 102.4 103.0 106.7 104.9
Firms Expecting Economy to Improve 27 32 24 10 13 32 39
Firms Expecting Higher Real Sales 11 8 3 17 18 26 23
Firms Reporting Now Is a Good Time to Expand the Business 13 13 12 23 25 30 23
Firms Planning to Increase Employment 18 23 21 18 19 21 18
Firms With Few or No Qualified Applicants for Job Openings (%) 48 50 46 53 52 51 49
Earnings Trends -3 -12 -25 -8 -5 -2 -11
Firms Reporting that Credit Was Harder to Get 3 2 1 4 4 4 4
Firms Raising Average Selling Prices 15 13 1 10 13 15 7
Firms Raising Worker Compensation 23 23 18 30 31 33 27
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