Haver Analytics
Haver Analytics
| Feb 14 2023

U.S. Small Business Optimism Rebounds in January

  • January NFIB Optimism Index recovers 0.5 pts. to 90.3; its 13th straight month below the 49-year average of 98.
  • Six of the 10 index components rebound.
  • Uncertainty Index rises to 76 in Jan.; highest since July ’21.
  • Outlook for business conditions in the next six months, while improving, remains in negative territory (a net negative 45%); expected real sales fall four pts. to a net negative 14%, a five-month low.
  • Inflation as Single Most Important Problem, while down six pts. to 26%, remains top business concern.

The NFIB Small Business Optimism Index increased to 90.3 in January after falling 2.1 points to 89.8 in December, according to the January 2023 Small Business Economic Trends survey conducted by the National Federation of Independent Business. The January figure was down from 97.1 last January and below the 49-year average of 98. Six of the 10 index components increased while four fell. The NFIB Small Business Uncertainty Index was at 76 in January, the second straight monthly rise to the highest level since July 2021, up five points from 71 in both December and last January.

The outlook for business conditions in the next six months improved somewhat but remained negative. The net balance of respondents expecting the economy to improve over the next six months increased six points to -45% in January from -51% in December, but it was still down from -33% last January. Expected real sales fell to a net -14% in January, the lowest level since August, from -10% in December and -3% last January. Although the latest reading remained very weak, it was up from a recent low of -29% in July. Plans to make capital outlays fell to 21% in January, the second consecutive m/m fall to the lowest level since March 2021, from 23% in December and 29% last January. Plans to expand the business rebounded to a net 7% in January, the highest reading since last February, from 5% in December; nevertheless, these figures were below 9% last January.

Labor markets remain tight with 52% of respondents reporting that qualified workers to fill job openings were hard to find in January. The latest figure was up one point from 51% in December but down from a 61% high in May and 55% last January. A net 19% planned to increase employment in January, up two points from 17% in December and registering a three-month high but modestly down from 26% last January. Notably, 45% reported positions not able to be filled in January, remaining historically very high; it was up four points from 41% in December but down from a recent-high 51% in May and 47% last January. Overall earnings trends rebounded to -26% in January from -30% in December, but they were down from -17% last January.

On the pricing front, inflation pressures have eased somewhat but remained too high for the Fed’s 2% target. The net percent raising their average selling prices slipped to a still-high 42% in January from 43% December; it was down from a 66% high last March and 58% last January. The percentage planning to raise prices rose to 29% in January after falling 10 points to 24% in December, but it was below a 52% high last March and 47% last January.

Wage inflation also remained high as a net 46% of respondents raised compensation during the last three months, the highest since August and up from 44% in December. However, it was down from a peak of 50% last January. A net 22% of firms planned to raise worker compensation in the next three months, five points down from 27% in both December and last January.

The single most important problem facing small businesses continued to be inflation, reported 26% of NFIB members in January, down from 32% in December but up from 22% last January. Other concerns (in January vs. December) included the quality of labor (24% vs. 23%), taxes (15% vs. 11%), and the cost of labor (10% vs. 8%).

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.

  • Winnie Tapasanun has been working for Haver Analytics since 2013. She has almost 20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations.   Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia.   Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.

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