U.S. NFIB Small Business Optimism Index Jumps in November; Highest Level Since June ’21

The NFIB Small Business Optimism Index rose to 101.7 in November, the seventh m/m rise in eight months and the highest level since June 2021, following a 2.2-point increase to 93.7 in October, according to the November 2024 Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the first time in 35 months that the index was above the 50-year average of 98. The index was also up from its recent low of 88.5 in March 2024, 90.6 in November 2023, and a low of 89.0 in April 2023; nevertheless, having remained below a high of 102.5 in June 2021. Nine of the 10 index components rose, none fell, and one was unchanged. The NFIB Small Business Uncertainty Index fell to 98 in November, the lowest level since August, from a record-high 110 in October; however, it was well above its recent low of 65 in November 2023 and a low of 55 in June 2022.

The outlook for business conditions in the next six months turned positive in the latest survey. The net balance of respondents expecting the economy to improve jumped to 36% in November, the sixth m/m rise in seven months and the highest level since June 2020, after a seven-point increase to -5% in October; it was significantly above a record low of -61% in June 2022. Expected real sales gained to a net 14% in November following a five-point rise to -4% in October, posting the highest level since February 2020. The latest reading was up from a low of -21% in May 2023 and a low of -29% in July 2022. A net -13% of respondents reported higher nominal sales in the past three months, up from -20% reported in October and registering the highest reading since June. The latest reading, however, was down from the most recent positive reading of 1% in May 2022 and a peak of 9% in June 2021.

Plans to make capital outlays rose to 28% in November from 22% in October, up from a low of 19% in September and a low of 19% in April 2023. The November number posted the highest reading since January 2022; nevertheless, having remained below a high of 31% in October 2021. Plans to expand the business advanced to 14% in November following a two-point increase to 6% in October; the latest figure, up from a low of 2% in March 2023, registered the best reading since a high of 15% in June 2021. Meanwhile, expected credit conditions edged up to -5% in November after a two-point increase to -6% in October; the latest number was slightly above its recent high of -6% in February 2024 but below a high of -4% in May 2022 and a high of -3% in November 2021.

On the labor front, labor markets remained relatively tight. Forty-eight percent of respondents reported that qualified workers to fill job openings were hard to find in November, up from 46% in October. These numbers were below a high of 57% in September 2023, a high of 61% in May 2022, and a peak of 62% in September 2021. A net 18% planned to increase employment in November, up from 15% in October and 15% in September, but it was down from a high of 26% in May 2022 and a peak of 32% in August 2021. Notably, 36% reported positions not able to be filled in November, up from 35% in October and registering the highest since August. These figures remained below a high of 51% in May 2022.

Overall earnings trends continued to improve in November while having remained in negative territory since December 2019. The figure increased to -26% in November, still a poor reading, following a one-point uptick to -33% in October; these numbers were below a high of -18% in March 2023.

On the pricing front, inflation pressures, while trending down, remained at an inflationary level. The net percent raising their average selling prices rose to 24% in November after a one-point decline to 21% in October; these numbers, however, were slightly down from 25% in November 2023 and well below a high of 66% in March 2022. The percentage planning to raise prices rose to 28% in November following a one-point increase to 26% in October; these figures were below 34% in November 2023 and a high of 52% in March 2022.

Wage inflation was still relatively high in the November survey. A net 32% of respondents raised compensation during the last three months, slightly up from 31% reported in the October survey. However, it was down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 28% of firms planned to raise worker compensation in the next three months, up from 23% reported in October and registering the highest reading since December 2023; nevertheless, having remained below a high of 30% in November 2023 and a high of 32% in October 2022.

Inflation continued to be an issue facing small businesses, as reported by 20% of NFIB members in November as the single most important problem. Registering the lowest reading since January 2024, the November figure was down from 23% in October and a peak of 37% in July 2022. The quality of labor was the second important concern with 19% in November, slightly down from 20% in October. Other concerns (in November vs. October) included taxes (14% vs. 16%), the cost of labor (11% vs 8%), and government requirements (8% vs. 8%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s SURVEYS database.