The May NFIB Small Business Optimism report was released today, June 12, 2018. The headline of the Economic Trends report is “Small Business Optimism Soars, Continuing Historic Run, Hitting Several Records in May.”

The Index of Small Business Optimism increased in May by 3 points to 107.8.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

The Small Business Optimism Index increased in May to the second highest level in the NFIB survey’s 45-year history. The index rose to 107.8, a three-point gain, with small businesses reporting high numbers in several key areas including compensation, profits, and sales trends.

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The May report hit several records:

• Compensation increases hit a 45-year high at a record net 35 percent.
• Positive earnings trends reached a survey high at a net three percent.
• Positive sales trends are at the highest level since 1995.
• Expansion plans are the most robust in survey history.

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Access to credit continues as a non-issue with 37 percent of owners reporting all credit needs were satisfied and 43 percent saying they were not interested in a loan, down seven points from last month and the lowest reading since 2007. Only one percent reported that financing was their top business problem. Owners planning to build inventories rose three points to a net four percent, the nineteenth positive reading in the past 20 months.

As reported in NFIB’s May jobs report, 23 percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, followed by taxes at 17 percent and regulations at 13 percent. Fifty-eight percent reported hiring or trying to hire, up one point from last month but 83 percent of those reported few or no qualified workers.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the June 12 Doug Short post titled “NFIB Small Business Survey:  ‘Small Business Optimism Soars…’“:

Further details regarding small business conditions can be seen in the full May 2018 NFIB Small Business Economic Trends (pdf) report.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2782.60 as this post is written

The February NFIB Small Business Optimism report was released today, March 13, 2018. The headline of the Economic Trends report is “Small Business Economy Heats Up After Years On The Sideline.”

The Index of Small Business Optimism increased in February by .7 points to 107.6.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

Small business owners are showing unprecedented confidence in the economy as the optimism index continues at record high numbers, rising to 107.6 in February, according to the NFIB Small Business Economic Trends Survey, released today. The historically high numbers include a jump in small business owners increasing capital outlays and raising compensation.

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Job creation remained strong in February, as reported in the NFIB February Jobs Report, released last week. Finding qualified workers remained as the number one problem for small business owners, surpassing taxes and regulations which have held the top two spots for years.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the March 13 Doug Short post titled “NFIB Small Business Survey:  ‘Heating Up After Years on the Sideline’“:

Further details regarding small business conditions can be seen in the full February 2018 NFIB Small Business Economic Trends (pdf) report.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2783.02 as this post is written

The November NFIB Small Business Optimism report was released today, December 12, 2017. The headline of the Small Business Economic Trends report is “Small Business Optimism Hits Near All-Time High.”

The Index of Small Business Optimism increased in November by 3.7 points to 107.5.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

“We haven’t seen this kind of optimism in 34 years, and we’ve seen it only once in the 44 years that NFIB has been conducting this research,” said NFIB President and CEO Juanita Duggan. “Small business owners are exuberant about the economy, and they are ready to lead the U.S. economy in a period of robust growth.”

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LABOR MARKETS

After several solid quarters, job creation slowed in the small business sector as business owners reported a seasonally adjusted average employment change per firm of 0.0 workers. Thirteen percent (down 1 point) reported increasing employment an average of 3.0 workers per firm and 10 percent (down 1 point) reported reducing employment an average of 2.9 workers per firm (seasonally adjusted). Fifty-two percent reported hiring or trying to hire (down 7 points), but forty-four percent (85 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill.

Eighteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (down 2 points), second only to taxes. This is the top ranked problem for those in construction (33 percent) and manufacturing (22 percent), getting more votes than taxes and the cost of regulations. Thirty percent of all owners reported job openings they could not fill in the current period, down 5 points from the record-high level reached in July and October. Eleven percent reported using temporary workers, down 3 points. A seasonally adjusted net 24 percent plan to create new jobs, up 6 points to a record high reading. Hiring plans were strongest in professional services, manufacturing and construction.

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COMPENSATION AND EARNINGS

Reports of higher worker compensation were unchanged at a net 27 percent, historically very strong all year. Owners complain at record rates of labor quality issues, with 85 percent of those hiring or trying to hire reporting few or no qualified applicants for their open positions. Eighteen percent selected “finding qualified labor” as their top business problem, far more than cite weak sales. Plans to raise compensation fell 4 points in frequency to a net 17 percent, still a solid number, but a surprise as labor markets seem to be getting tighter. The frequency of reports of positive profit trends improved 2 points to a net negative 12 percent reporting quarter on quarter profit improvements, a solid reading historically, among the best since 2007.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the December 12 Doug Short post titled “NFIB Small Business Survey:  Index Near All-Time High“:

Further details regarding small business conditions can be seen in the full November 2017 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2667.31 as this post is written

The August NFIB Small Business Optimism report was released today, September 12, 2017. The headline of the Small Business Economic Trends report is “Small Business Optimism Holds Its Altitude In August.”

The Index of Small Business Optimism increased in August to 105.3.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

The NFIB Index rose 0.1 points to 105.3. Five of the components increased, while five declined. The lofty reading keeps intact a string of historically high performances extending back to last November.

“Consumer demand is very strong, and the regulatory relief has been dramatic,” said Duggan. “Small business owners still expect progress on tax reform and healthcare, and they will be watching closely.”

According to NFIB Chief Economist Bill Dunkelberg, the August figures for capital outlays are typical of a growing economy.

“Small firms are now making long-term investments in new machines, equipment, facilities, and technology,” he said. “That’s a real sign of strength, and it will be interesting to see if the August result becomes a trend.”

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Labor Markets

Small business owners reported a seasonally adjusted average employment change per firm of 0.18 workers per firm over the past three months, virtually unchanged from July. Fourteen percent (up 1 point) reported increasing employment an average of 4.4 workers per firm and 12 percent (up 1 point) reported reducing employment an average of 2.4 workers per firm (seasonally adjusted). Fifty-nine percent reported hiring or trying to hire (down 1 point), but 52 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (unchanged), second only to taxes. Labor quality is the top ranked problem in Construction (33 percent) and Manufacturing (25 percent), receiving more votes than taxes and regulatory costs. Thirty-one percent of all owners reported at least one job opening they could not fill in the current period, down 4 points but a very high reading. A seasonally adjusted net 18 percent of owners plan to create new jobs, off 1 point from July but historically very strong.

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Credit Markets

Three percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically very low. Thirty-four percent reported all credit needs met (up 3 points) and 49 percent explicitly said they were not interested in a loan, down 2 points. Including those who did not answer the question, 63 percent of owners have no interest in borrowing, down 3 points. Thirty-one percent of all owners reported borrowing on a regular basis (up 1 point). The average rate paid on short maturity loans was down 40 basis points at 5.5 percent, little changed even as the Federal Reserve raises rates.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the September 12 Doug Short post titled “NFIB Small Business Survey:  Index Maintains Momentum in August“:

Further details regarding small business conditions can be seen in the full August 2017 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2496.48 as this post is written

The May NFIB Small Business Optimism report was released today, June 13, 2017. The headline of the Small Business Economic Trends report is “Small Business Optimism Continues Remarkable Surge.”

The Index of Small Business Optimism was unchanged in May at 104.5.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

“The remarkable surge in optimism that began last year right after the election shows no signs of slowing down” said NFIB President and CEO Juanita Duggan. “Small business owners are highly encouraged by the President’s regulatory reform agenda, and they remain optimistic there will be tax reform and health-care reform. This is a policy-driven phenomenon.”

The Index for May matched its strong performance in April of 104.5. That means the Index has been at a historically high level for six straight months. Five of the Index components posted a gain, four declined, and one remained unchanged.

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A strong majority of owners, 59 percent, reported hiring or trying to hire in May, although 51 percent said they found few or no qualified workers. Remarkably, that was a problem for 86 percent of owners who said they tried to hire. Nineteen percent of all owners in the survey said finding qualified workers was their top concern, making it the second-biggest problem for small business.

“The tight labor market has been a persistent problem for small business owners for the past several months, and the problem appears to be getting worse,” said NFIB Chief Economist Bill Dunkelberg. “It’s forcing small business owners to increase compensation, which we’re seeing in this data, to attract new workers and keep the ones they have. But it also means a lot of small business owners are short-handed. They can’t keep up with customer demand because the labor pool isn’t producing enough qualified workers. It’s a significant structural problem in the economy that policymakers will have to watch.”

Twenty-eight percent reported plans to make capital outlays, a one-point gain from April but well below historical levels for periods of growth.

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Credit Markets

Only 3 percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically very low. Thirty-one percent reported all credit needs met (down 1 point), and 51 percent explicitly said they did not want a loan. Only 1 percent reported that financing was their top business problem compared to 22 percent citing taxes, 19 percent citing the availability of qualified labor, and 13 percent regulations and red tape. Twenty-eight percent of all owners reported borrowing on a regular basis (down 3 points). The average rate paid on short maturity loans was up 50 basis points to 5.9 percent.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the June 13 Doug Short post titled “NFIB Small Business Survey:  Index Continues Surge in May“:

Further details regarding small business conditions can be seen in the full May 2017 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2439.33 as this post is written

The February NFIB Small Business Optimism report was released today, March 14, 2017. The headline of the Small Business Economic Trends report is “Small Business Owners Continue To Have High Expectations For Washington.”

The Index of Small Business Optimism decreased .6 points in February to 105.3.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

Business owners reporting higher sales improved four percentage points, rising to the first positive reading since early 2015. The percent of owners expecting higher real sales fell three points to a net 26 percent. This follows a 20-point rise in December and remains positive.

Capital spending among small business owners rose two points to 62 percent, the second highest reading since 2007. Owners reported spending on new equipment, vehicles, and improvement or expansion of facilities. The percent of owners planning capital outlays slipped one point to 26 percent. Duggan said after years of ball-and-chain regulation and poor economic growth, small businesses are ready to invest.

“Small businesses will begin to turn optimism into action when their two biggest priorities, healthcare and small business taxes, are addressed,” said Duggan. “To small business, these are both taxes that need reform. It is money out the door that strangles economic growth.”

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Credit Markets

Three percent of owners reported that all their borrowing needs were not satisfied, down 1 point. Thirty percent reported all credit needs met (down 1 point), and 52 percent explicitly said they did not want a loan. However, including those who did not answer the question, uninterested in borrowing, 67 percent of owners have no interest in borrowing. Record numbers of firms remain on the “credit sidelines”, seeing no good reason to borrow yet, in spite of the surge in optimism. As optimism is translated into spending plans, borrowing activity should pick up. Only 2 percent reported that financing was their top business problem compared to 22 percent citing taxes, 15 percent citing regulations and red tape, and 17 percent the availability of qualified labor. Weak sales garnered 12 percent of the vote.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the March 14 Doug Short post titled “NFIB Small Business Survey:  Optimism Remains High in February“:

Further details regarding small business conditions can be seen in the full February 2017 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2364.97 as this post is written

The November NFIB Small Business Optimism report was released today, December 13, 2016. The headline of the Small Business Economic Trends report is “Special NFIB Optimism Index Finds Dramatically Different Attitudes Among Small Business Owners Before And After Election.”

The Index of Small Business Optimism increased 3.5 points in November to 98.4.

Here are some excerpts from that I find particularly notable (but don’t necessarily agree with):

Small business optimism remained flat leading up to Election Day and then rocketed higher as business owners expected much better conditions under new leadership in Washington, according to a special edition of the monthly NFIB Index of Small Business Optimism, released today.

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Labor Markets

Reported job creation remained weak in November with the seasonally adjusted average employment change per firm posting a gain of 0.02 workers per firm, positive, but barely. Fifty-eight percent reported hiring or trying to hire (up 3 points), but 52 percent reported few or no qualified applicants for the positions they were trying to fill. Sixteen percent of owners cited the difficulty of finding qualified workers as their ‘Single Most Important Business Problem’.

Thirty-one percent of all owners reported job openings they could not fill in the current period, up 3 points and the highest reading in this recovery. The increase accurately predicted the decline in the unemployment rate from what many already call a “full employment” level. Sixteen percent reported using temporary workers, up 1 point. A seasonally adjusted net 15 percent plan to create new jobs, up 5 points from October and the strongest reading in the recovery.

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Credit Markets

Four percent of owners reported that all their borrowing needs were not satisfied, unchanged from October. Thirty percent reported all credit needs met (up 1 point), and 52 percent explicitly said they did not want a loan, down 1 point. Only 2 percent reported that financing was their top business problem. Thirty-one percent of all owners reported borrowing on a regular basis (up 3 points). The average rate paid on short maturity loans rose 40 basis points to 5.6 percent. Overall, loan demand remains historically weak, owners can’t find many good reasons to borrow and invest, even with abundantly cheap money.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the December 13 Doug Short post titled “NFIB: Small Business Survey:  ‘Small Business Optimism Soars Post Election’“:

Further details regarding small business conditions can be seen in the full November 2016 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2256.96 as this post is written

The August NFIB Small Business Optimism report was released today, September 13, 2016. The headline of the Small Business Economic Trends report is “Political Climate As Negative Factor Hits Record High In Monthly NFIB Index Of Small Business Optimism.”

The Index of Small Business Optimism increased .2 points in August to 94.4.

Here are some excerpts from that I find particularly notable (but don’t necessarily agree with):

At 94.4, the Index remains well below the 42-year average of 98. Five of the 10 Index components posted a gain, four declined, and one remained unchanged. The outlook for business conditions in the next six months had the most dramatic change, dropping seven points. Setting an all-time high for the survey, 39 percent of business owners cited the political climate as a reason not to expand.  Uncertainty about the economy and government policy also hit record highs among small business owners.

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Inventory and Sales

The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months fell 1 percentage point to a net negative 9 percent. Eleven percent cited weak sales as their top business problem, down 1 point from July. Seasonally adjusted, the net percent of owners expecting higher real sales volumes fell 2 points to a net negative 1 percent of owners, a weak showing.

The net percent of owners reporting inventory gains increased 5 points to a net negative 0 percent (seasonally adjusted), restoring some balance after a major reduction in the first half of the year. The net percent of owners viewing current inventory stocks as “too low” improved 2 points to a net negative 2 percent. The net percent of owners planning to add to inventory increased 1 point to a net 1 percent, not a strong picture, but now positive and a contribution to growth if owners follow through as planned.

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Capital Spending

Fifty-seven percent reported capital outlays, down 2 points from July. The percentage of owners making an outlay peaked in July 2015 at 61 percent, revisiting that percentage in January but has faded since. The percent of owners planning capital outlays in the next 3 to 6 months rose 3 points to 28 percent. This is 1 point better than the recovery high reading reached in October 2014, but historically weak. The small business sector remains in “maintenance mode”. Seasonally adjusted, the net percent expecting better business conditions deteriorated 7 percentage points to a net negative 12 percent. Clearly, expectations for the economy are not conducive to a meaningful improvement in business investment as prospects for profits are poor.

Further details regarding small business conditions can be seen in the full August 2016 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2127.02 as this post is written

The May NFIB Small Business Optimism report was released today, June 14, 2016. The headline of the Small Business Economic Trends report is “Small Business Optimism Rises Modestly In May.”

The Index of Small Business Optimism increased .2 points in May to 93.8.

Here are some excerpts from that I find particularly notable (but don’t necessarily agree with):

The Index of Small Business Optimism rose two tenths of a point in May to 93.8, a negligible increase showing no real enthusiasm for making capital outlays, increasing inventories, or expanding, according to the National Federation of Independent Business (NFIB).

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INVENTORIES AND SALES

The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months deteriorated 2 percentage points to a net negative 8 percent, a poor reading and reflective of weaker consumer spending in Q1. Fourteen percent cited weak sales as their top business problem, up 3 points from April. Overall, this is not a strong sales picture. Seasonally adjusted, the next percent of owners expecting higher real sales volumes was unchanged at a net 1 percent of owners, a weak showing. This is well below the average 14 point reading in the first three months of 2015.

The net percent of owners reporting inventory increases deteriorated 1 point to a net negative 6 percent (seasonally adjusted), a weak reading. The net percent of owners viewing current inventory stocks as “too low” improved a point to a net negative 4 percent. The net percent of owners planning to add to inventory decreased 1 point to a net negative 1 percent. These weak inventory investment readings are consistent with the rather poor performance of consumer spending in the first quarter, leaving owners with excessive stocks and no incentive to add to them.

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CAPITAL SPENDING

Fifty-eight percent reported capital outlays, down 2 points. The percent of owners planning capital outlays in the next 3 to 6 months fell 2 points to 23 percent. Seasonally adjusted, the net percent expecting better business conditions increased 5 percentage points to a net negative 13 percent. The seasonally adjusted net percent expecting higher real sales was unchanged at 1 percent of all owners, not very strong. Clearly, expectations for the economy are not conducive to a meaningful improvement in business investment.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the June 14 Doug Short post titled “NFIB: Small Business Survey Rises Modestly in May“:

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Further details regarding small business conditions can be seen in the full May 2016 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2069.88 as this post is written

The February NFIB Small Business Optimism report was released today, March 8, 2016. The headline of the Small Business Economic Trends report is “Small Business Optimism Hits Two-Year Low.”

The Index of Small Business Optimism dropped 1.0 points in February to 92.9.

Here are some excerpts from that I find particularly notable (but don’t necessarily agree with):

The percent of owners citing the difficulty of finding qualifed workers as their Single Most Important Business Problem fell 3 points to 12 percent, still number three on the list of problems behind taxes and regulations and red tape, and historically high.

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INVENTORIES AND SALES

The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months improved 1 point, rising to a net negative 6 percent on the back of a solid January consumer spending number. Eleven percent cited weak sales as their top business problem, down 1 point. Overall, this is not a strong sales picture. Expected real sales volumes posted a 3 point loss, falling to a seasonally adjusted net 0 percent of owners expecting gains. This is well below the average 14 point reading in the first three months of 2015. Owners aren’t expecting a very energetic opening to the year.

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CAPITAL SPENDING

Fifty-eight percent reported capital outlays, down 3 points. Overall, capital spending weakened again in February. The percent of owners planning capital outlays in the next 3 to 6 months fell 2 points to 23 percent. Clearly, expectations for the economy are not conducive to an improvement in business investment.

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CREDIT MARKETS

Four percent of owners reported that all their borrowing needs were not satisfied, 2 points above the record low reached in September 2015. Thirty-one percent reported all credit needs met (down 4 points), and 52 percent explicitly said they did not want a loan. For most of the recovery, record numbers of firms have been on the “credit sidelines”, seeing no good reason to borrow. Only 3 percent reported that financing was their top business problem compared to 21 percent citing taxes, 19 percent citing regulations and red tape and 12 percent citing the availability of qualified labor.  When credit is an issue, owners report it as illustrated by 37 percent reporting credit hard to get in the early 1980s compared to 5 percent today. The Fed reported that business lending is on the rise, but there is little evidence of this among NFIB’s 350,000 member firms.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the March 8 Doug Short post titled “NFIB:  Small Business Survey ‘Just Treading Water’“:

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Further details regarding small business conditions can be seen in the full February 2016 NFIB Small Business Economic Trends (pdf) report.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1993.84 as this post is written