U.S. NFIB Small Business Optimism Index Rebounds in September

The NFIB Small Business Optimism Index rose to 91.5 in September, the fifth m/m rise in six months, following a 2.5-point drop to 91.2 in August, according to the September 2024 Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index was up from its recent low of 88.5 in March, 90.8 in September 2023, and a low of 89.0 in April 2023; nevertheless, having been below the 50-year average of 98 for the 33rd straight month and a high of 102.5 in June 2021. Five of the 10 index components rose, three fell, and two were unchanged. The NFIB Small Business Uncertainty Index jumped to 103 in September, the highest level on record, after a two-point increase to 92 in August; it was well above its recent low of 65 in November 2023, 79 in September 2023, and a low of 55 in June 2022.

The outlook for business conditions in the next six months was less negative in the latest survey. The net balance of respondents expecting the economy to improve rose to -12% in September, the fourth m/m rise in five months, after a six-point decline to -13% in August; it was significantly up from a record-low -61% in June 2022. Expected real sales rebounded to a net -9% in September following a nine-point drop to -18% in August, indicating continued pessimism but at a less severe pace. The latest reading was up from a low of -21% in May 2023 and a low of -29% in July 2022. A net -17% of respondents reported higher nominal sales in the past three months, down from -16% reported in August and July and registering the lowest reading since November 2023. The latest reading was also 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 fell to 19% in September from 24% in August, down from its recent low of 20% in March and registering the same lowest reading as in April 2023; also below a high of 27% in July 2023 and a high of 31% in October 2021. Plans to expand the business registered at 4% in September and August following a one-point increase to 5% in July. These figures, while slightly up from a low of 2% in March 2023, were below a high of 11% in December 2021 and a high of 15% in June 2021. Meanwhile, expected credit conditions registered at -8% in September and August after holding at -7% for three consecutive months; the latest number was below its recent high of -6% in February, a high of -4% in May 2022, and a high of -3% in November 2021.

On the labor front, labor markets remained tight but eased somewhat. Fifty-two percent of respondents reported that qualified workers to fill job openings were hard to find in September, down from 56% in August. 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 15% planned to increase employment in September, slightly up from 13% in August, but it was down from its recent high of 18% in November 2023, a high of 26% in May 2022, and a peak of 32% in August 2021. Notably, 34% reported positions not able to be filled in September, down from 40% in August and registering the lowest since January 2021. These figures, still historically high, remained below a high of 51% in May 2022. Overall earnings trends increased to -34% in September, still a poor reading, following a seven-point decline to -37% in August (lowest since March 2010); these numbers were below a high of -18% in March 2023.

On the pricing front, inflation pressures, while generally trending down, remained at an inflationary level. The net percent raising their average selling prices rose to 22% in September after a two-point decline to 20% in August; these numbers, however, were modestly down from 29% in September 2023 and well below a high of 66% in March 2022. The percentage planning to raise prices held at 25% in September and August following a two-point decline to 24% in July; these figures were well below a high of 52% in March 2022.

Wage inflation, while still relatively high, eased somewhat in the September survey. A net 32% of respondents raised compensation during the last three months, slightly down from 33% reported in the August and July surveys and posting the lowest reading since April 2021. It was also down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 23% of firms planned to raise worker compensation in the next three months, up from 20% reported in August and registering the highest reading since January; 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 23% of NFIB members in September as the single most important problem. It was down from 24% in August and a peak of 37% in July 2022. The quality of labor was the second important concern with 17% in September, down from 21% in August. Other concerns (in September vs. August) included taxes (14% vs. 13%), the cost of labor (9% vs. 9%), and government requirements (9% 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.