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Economy in Brief

U.S. Small Business Optimism Rises Modestly in August
by Winnie Tapasanun  September 14, 2021

• NFIB Optimism Index improves slightly while Uncertainty Index falls to the lowest level since January 2016.

• Five of the 10 index components rise.

• Inflation pressures increase.

The NFIB Small Business Optimism Index was at 100.1 in August, up from 99.7 in July but down from 102.5 in June, according to the National Federation of Independent Business. Five of the 10 index components increased, four fell, and one held steady. The NFIB Uncertainty Index fell to 69 in August, the lowest level since January 2016, from 76 in July.

The net balance of respondents expecting the economy to improve over the next six months dropped to -28% in August, the lowest level since January 2013, from -20% in July. A net -2% of firms expected higher real sales, a slight improvement from -4% in July but still well below 7% in June. A net 32% intend to increase employment, the highest reading on record and up from July's 27%. A net 41% of respondents reported increasing compensation, a 48-year record high and up from 38% in July. But a slightly lessened net 26% plan to raise compensation in the next three months, down from July's 27% record-high reading. Overall earnings trends deteriorated to -15%, the lowest since March, from July's -13%.

Small businesses are still having difficulty finding qualified employees to meet their demand and managing supply chain disruptions. An increased 60% of respondents reported that qualified workers to fill job openings were hard to find. The figure was the highest on record and up from 57% in July. Plans to make capital outlays improved to 30%, up from 26% in July but still historically weak.

Inflation pressures rose in August. The percentage of firms raising selling prices increased to 49%, the record high, from July's 46%. The percentage planning to raise selling prices held at 44% for the third straight month, its highest reading since October 1979.

Regarding important issues for small businesses, 10% of owners cited labor costs as their top business problem in August, up from 9% in July. Twenty-eight percent said that labor quality was their top business problem, up from July's 26%. Both August readings were record high. Inflation concerns rose to 13%, up from 11% in July and the same level as in June.

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 '20 2020 2019 2018
Small Business Optimism Index (1986=100) 100.1 99.7 102.5 100.2 99.6 103.0 106.7
Firms Expecting Economy to Improve -28 -20 -12 24 20 13 32
Firms Expecting Higher Real Sales -2 -4 7 3 1 18 26
Firms Reporting Now Is a Good Time to Expand the Business 11 13 15 12 13 25 30
Firms Planning to Increase Employment 32 27 28 21 16 19 21
Firms With Few or No Qualified Applicants for Job Openings (%) 60 57 56 46 46 52 51
Earnings Trends -15 -13 -5 -25 -16 -5 -2
Firms Reporting that Credit Was Harder to Get 3 2 2 1 3 4 4
Firms Raising Average Selling Prices 49 46 47 1 5 13 15
Firms Raising Worker Compensation 41 38 39 18 23 31 33
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