Tuesday, November 29, 2022
Economy and AnalysisSmall Business Optimism Hits All-Time High

Small Business Optimism Hits All-Time High


It seems like month after month the same story appears. Small businesses are optimistic about the future. This month’s data is no different. The NFIB Small Business Optimism Index jumped to 108.8 last month, the highest level ever recorded in the survey’s 45-year history and above the previous record of 108 in 1983, set during the second year of Ronald Reagan’s presidency. The August figure was up from a 107.9 reading in July.

A few of the key takeaways from the August NFIB numbers deal with sentiment, job creation and capital spending.

  • Job creation plans and unfilled job openings both set new records.
  • The percentage of small business owners saying it is a good time to expand tied the May 2018 all-time high.
  • Inventory investment plans were the strongest since 2005 and capital spending plans the highest since 2007.

According to NFIB President and CEO Juanita D. Duggan, “Today’s groundbreaking numbers are demonstrative of what I hear every day from small business owners – that business is booming. As the tax and regulatory landscape changed, so did small business expectations and plans.” The data from recent reports have shown that expectations were high, but now we are seeing them in tangible figures that will affect GDP. NFIB Chief Economist Bill Dunkelberg states, “Now the Index is dominated by real business activity that makes GDP grow: job creation plans, job openings, strong capital spending plans, record inventory investment plans, and earnings. Small business is clearly helping to drive that four percent growth in the domestic economy.”

Hiring still seems to be at the crux of the issue for small business. This has been a common theme for the past year or so. Sixty-two percent of owners reported trying to hire, with 89 percent of those owners reporting few or no qualified applications for their open positions. A record 25 percent of owners cited the difficulty of finding qualified workers as their single most important business problem, up two points from last month.

The stock market as measured by the S&P 500 continues to exceed expectations and hit new highs. Many investment banks like Goldman Sachs and Morgan Stanley are giving warning signs of a correction. This is not the case in the companies that comprise the Russell 2000. This “small company” stock index began posting record gains as well, based on very favorable profit reports for small businesses. The “small cap” companies in the Index are much larger than NFIB members, but their experience mirrors the record reports of rising profits among NFIB members.

NFIB companies are not reporting problems obtaining credit. Money is available and at rates that are lower than what was predicted. The Ten Year Treasury yield did hit 3 percent, a rate typically used by small business lenders as the base for loan interest rates. This has helped keep the pipeline of funding going forward. The political cycle dominates the news with predictions of market failures and economic woes. This may indeed be the case. But this is not likely to have much of an impact on the level of economic activity which is on course to equal or surpass last quarter’s performance.

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