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Small-Business Optimism Ticks Up in November

Small-business optimism increased slightly (0.9 point) to a reading of 92.5, according to the National Federation of Independent Business's monthly index. Small-business employment is better at the end of this year than last year, as the NFIB indicators anticipated, but not enough to restore the 2007 level of hiring.

A review of the November indicators is as follows:

Job creation: NFIB owners increased employment by an average of 0.05 workers per firm in November (seasonally adjusted), half the October figure, but still positive. Seasonally adjusted, 14 percent of owners (up 2 points) reported adding an average of 3.7 workers per firm over the past few months.

Offsetting that, 12 percent (up 3 points) reduced employment an average of 3.4 workers, producing the seasonally adjusted gain of 0.05 workers per firm overall. The remaining 74 percent of owners made no net change in employment. Fifty-one percent of the owners hired or tried to hire in the last three months and 44 percent reported few or no qualified applicants for open positions.

Hard-to-fill job openings: Twenty-three percent of all owners reported job openings they could not fill in the current period (up 2 points), a positive signal for the unemployment rate and the highest reading since January, 2008. Thirteen percent reported using temporary workers, down 2 points from October.

Sales: The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months was unchanged at a negative 8 percent. Fifteen percent still cite weak sales as their top business problem. The net percent of owners expecting higher real sales volumes rose 1 point to 3 percent of all owners after falling 6 points in October (seasonally adjusted), a weak showing.

Earnings and wages: Earnings trends deteriorated a bit in November, falling to a net negative 24 percent. The economy remains bifurcated, large firms doing fairly well, small businesses showing little growth or improvement.

Three percent reported reduced worker compensation and 16 percent reported raising compensation, yielding a seasonally adjusted net 14 percent reporting higher worker compensation (down 2 points). A net seasonally adjusted 14 percent plan to raise compensation in the coming months, up 4 points. With a net 14 percent raising compensation but a net 2 percent raising selling prices, profits will continue to be under pressure.

Credit markets: Credit continues to be a non-issue for small employers with just 4 percent of the owners reporting that all their credit needs were not met, down 2 points. Thirty-two percent reported all credit needs met, and 52 percent explicitly said they did not want a loan. Twenty-nine percent of all owners reported borrowing on a regular basis, up 1 point but a near-record low. The average rate paid on short maturity loans was steady at 5.4 percent.

Capital outlays: The frequency of reported capital outlays over the past 6 months fell 2 points to 55 percent, stuck in the “mid-50s” since recovering in 2012 from the lows of 45 reached in late 2009 and early 2010. The small business sector appears to still be in “maintenance mode,” with little expansion planned in the future. The percent of owners planning capital outlays in the next 3 to 6 months rose 1 point to 24 percent. Capital spending is at its highest point since early 2008 but has been stuck well below normal levels for several years, threatening the improvements in productivity needed to raise real wages.

Inventories: The pace of inventory reduction continued, with a net negative 7 percent of all owners reporting growth in inventories (seasonally adjusted), 1 point worse than October. A negative outlook for the economy and real sales prospects adversely impacted inventory satisfaction. The net percent of owners planning to add to inventory stocks was a net 0 percent (up 1 point), no new orders for inventory when stocks are excessive compared to expected sales.

Inflation: Seasonally adjusted, the net percent of owners raising selling prices was 2 percent, down 3 points. Seasonally adjusted, a net 19 percent plan price hikes, up 1 point.

The report is based on the responses of 762 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of November. Download the complete study at

© 2019 Gale Media, Inc.

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