The 2020 Mid-Year Economic Update_long

NFIB Small Business Optimism Falls in January

Index decreases 1.3 points to 93.9 for the month.

The NFIB Small Business Optimism Index fell 1.3 points in January to 93.9.

“The Small Business Optimism Index fell a bit more than one point, not much of a response to stock market turbulence or the Federal Reserve’s move to raise interest rates,” said NFIB Chief Economist Bill Dunkelberg. “The decline in optimism was accounted for by two important Index components, expected business conditions in six months and expected real sales. These expectations are important determinants of decisions to hire, to expand business operations and to order new inventory, all drivers of economic growth.”   

Reported job creation improved in January, with the average employment gain per firm rising to 0.11 workers per firm from -0.07 workers in December. Fifty-two percent reported hiring or trying to hire (down 3 points), but 45 percent reported few or no qualified applicants for the positions they were trying to fill.  Fourteen percent reported using temporary workers, down 1 point.

The percent of owners citing the difficulty of finding qualified workers as their single most important business problem was unchanged at 15 percent. Twenty-nine percent of all owners reported job openings they could not fill in the current period, up 1 point and at the highest level for this expansion.  This is a solid reading historically and is suggestive of a reduction in the unemployment rate.

Sixty-two percent reported capital outlays, unchanged from November. Overall, capital spending was much stronger in November and December, reflecting growing certainty that expensing provisions would be renewed. Not only was it renewed, it was made permanent, giving small businesses some much needed certainty. The percent of owners planning capital outlays in the next 3 to 6 months rose 1 point to 26 percent, not a strong reading historically but among the best in this expansion.

Earnings trends were basically unchanged at a net negative 18 percent reporting quarter on quarter profit improvements.  Far more owners are reporting profits lower quarter to quarter than higher. 

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