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Economy in Brief

U.S. Small Business Optimism Nears Two-Year High
by Tom Moeller  December 13, 2016

The National Federation of Independent Business reported that its Small Business Optimism Index jumped 3.7% during November (4.1% y/y) to 98.4. It was the strongest level of optimism since December 2014.

A strengthened 12% of firms reported they were expecting the economy to improve, also the most since December 2014. Another area of strength was that 11 percent expected higher real sales in six months, up from one percent in October. Fifteen percent of firms expected to increase employment, the most since December of this year.

Also on the labor front, a sharply increased 52% of firms indicated they had few or no qualified candidates to fill job openings. That was the most since October 1999. Thirty one of firms indicated they had positions they were unable to fill right now, up from 9% during all of 2009. Despite hiring difficulty, a lessened 21% percent of firms were raising worker compensation. That's down from 25% in October, and below January's 27% high. A lessened 15% were planning to raise worker compensation, below December's 21% high.

An the price inflation front, an increased 5% of firms were raising average selling prices, the most since January of last year. Expectations for pricing also remained strong as 19% planned to raise prices, the most since December.

A sharply lower nineteen percent of firms indicated that taxes were the single most important problem, and a lower 18% reported that government requirements were the largest single problem. A slightly increased 16% felt challenged by the quality of labor, while just 12% of firms indicated that poor sales were the largest single problem. Ten percent of firms reported insurance cost & availability as the largest hurdle, up sharply from a 7% September low. Just 6% reported the cost of labor was the biggest problem, and a lessened 7 percent reported competition from large businesses as the largest problem. Inflation as the largest problem was indicated by a higher 3% percent of respondents, the most in 6 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 %) Nov Oct Sep Nov'15 2015 2014 2013
Small Business Optimism Index (1986=100) 98.4 94.9 94.1 94.5 96.1 95.6 92.4
Firms Reporting Now is a Good Time To Expand the Business 11 9 7 12 11 10 7
Firms Expecting Higher Real Sales In Six Months 11 1 4 -1 8 11 4
Firms Expecting Economy To Improve 12 -7 0 -10 -5 -5 -15
Firms Planning to Increase Employment 15 10 10 11 12 10 6
Firms With Few or No Qualified Applicants For Job Openings 52 48 48 47 46 43 39
Firms Reporting That Credit Was Harder To Get 4 4 5 4 4 6 6
Firms Raising Average Selling Prices 5 2 -1 4 2 8 2
Firms Raising Worker Compensation 21 25 22 24 23 21 15
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