The National Federation of Independent Business’s (NFIB’s) small business optimism index fell to 94.4 in August, the first month-over-month decline since March, worse than economists had expected, and therefore still well below the 40-year average (98.0). Reported plans to increase capital spending improved last month but five of the ten main components that make up the headline sentiment index deteriorated in August, including a significant drop in respondents’ overall economic outlook. Surveyed owners’ expectations for sales growth and earnings trends also softened last month. Shifting the focus to employment, the measure of current job openings rose markedly in August, enough to more than offset the sharp decline in July. However, total employment continued to contract last month, and reported hiring plans for the next three months fell markedly, likely due to increased uncertainty surrounding the economy and the upcoming Presidential election. There was also no additional pressure on wages in August despite nearly half (48 percent) of respondents complaining that there are “few or no” qualified applicants for open positions. Bill Dunkelberg, NFIB’s chief economist, added that “health insurance costs keep rising, diverting compensation gains into benefits rather than take home pay.” Elsewhere in the report, the top two problems facing surveyed small business owners were once again taxes and government regulation but “quality of labor” continues to be a growing challenge. Many owners were also worried about poor sales in August, which is worth monitoring going forward because such concerns often lead unemployment.
Sources: NFIBPost author: Charles Couch