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Economy in Brief

U.S. Small Business Optimism Weakens in November
by Tom Moeller  December 8, 2020

• NFIB Small Business Optimism fell to lowest level in three months.

• Economic growth worries surge.

• Pricing gauges continue to strengthen.

The National Federation of Independent Business' (NFIB) Small Business Optimism Index weakened to 101.4 during November, down from the recent high of 104.0 and the record 108.8 in August 2018. Nevertheless, it remained up from the April low of 90.9.

A greatly lessened net 8% of respondents felt that the economy would improve, the least since March and down from 39% in June. A slightly lower net 10% expected higher real sales and earnings trends deteriorated. A diminished net 12% of firms of firms thought that now was a good tine to expand, down from the August 2018 peak of 34%. A lessened 47% of firms found few or no qualified candidates to fill job openings. Working higher m/m were the net 21% of firms which planned to raise employment, up from one percent in April, though steady y/y.

Credit was less hard to get by a low two percent of respondents, down from April's high of four percent.

Pricing power improved again. An increased net 18% of firms raised prices, up from price deflation during the spring. A higher net 21% were planning to raise prices in November, the most since January. An improved net 24% of firms raised worker compensation, the most since March, while a markedly higher 20% planned to do so over the next three months, up from April's sevenpercent.

The most important issues for small businesses were the quality of labor (24%), taxes (20%), up from 14% twelve months earlier, and poor sales (13%). The cost of labor troubled a lessened six 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) Nov Oct Sep Nov'19 2019 2018 2017
Small Business Optimism Index (1986=100) 101.4 104.0 104.0 104.7 103.0 106.7 104.9
Firms Expecting Economy to Improve 8 27 32 13 13 32 39
Firms Expecting Higher Real Sales 10 11 8 13 18 26 23
Firms Reporting Now Is a Good Time to Expand the Business 12 13 13 29 25 30 23
Firms Planning to Increase Employment 21 18 23 21 19 21 18
Firms with Few or No Qualified Applicants for Job Openings (%) 47 48 50 53 52 51 49
Earnings Trends -7 -3 -12 2 -5 -2 -11
Firms Reporting that Credit Was Harder to Get 2 3 2 3 4 4 4
Firms Raising Average Selling Prices 18 15 13 12 13 15 7
Firms Raising Worker Compensation 24 23 23 30 31 33 27
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