There were two important reports on the U.S. economy released this morning. First, the National Federation of Independent Business’s (NFIB’s) small business optimism index jumped to 105.8 in December, the best month-over-month gain in more than three decades and the highest reading since 2004. Seven of the ten main components that make up the headline sentiment index improved last month but nearly three-quarters of the advance was due to sharp gains in surveyed owners’ outlooks for both sales and the overall economy. There were also solid increases in capital expenditure plans and the percentage of respondents who believe that “now is a good time to expand.” As for small business employment conditions, net hiring improved last month to the best level since September 2015, likely contributing to the decline in the total number of job openings. Further, hiring plans rose in December to a recovery high, and the percentage of respondents complaining that there are “few or no” qualified applicants for vacant positions collapsed to the lowest level since March. The latter was likely helped by the sharp gains in both current worker compensation and projected wage growth. The top two reported problems facing surveyed small business owners were once again taxes and government regulation, although such concerns have declined markedly since the election. Bill Dunkelberg, NFIB’s chief economist, added that “Optimistic consumers and business owners are more likely to bet (spend and hire) on a future that seems to hold promise, but to maintain the enthusiasm, reality will play an important supporting role. The appearance of a new customer is much more powerful than the expectation of one. And actual results in Washington D.C. will be much more supportive than “hope and no good change” as we have discovered.”
Elsewhere, the latest job openings and labor turnover survey (JOLTS) from the Bureau of Labor Statistics, one of Federal Reserve Chair Janet Yellen’s favorite economic indicators, showed that there were 5.522 million job openings in America in November (lagged release). That was an increase from October’s downward-revised 5.451 million print but below the average reading for the first ten months of 2016. Total hires also rose in November (5.219 million), the second month-over-month gain in a row and the best print since August. This was not too surprising considering that nonfarm payrolls growth firmed in November, although total hires have still experienced a net decline on a year-over-year basis. More encouraging is that the number of unemployed Americans per job opening fell in November to 1.28, one of the best readings in the history of this data series. Further, the ratio of quits to layoffs and discharges ended November at 1.87, the 3rd-highest print on record and a sign of U.S. workers’ increased willingness to give up their current job security for better employment opportunities.
Sources: Econoday, Bloomberg, ZH, NFIB, U.S. DoL, FRBSLPost author: Charles Couch