Small business owner confidence firmed in September, according to an updated report from the National Federation of Independent Business (NFIB). Specifically, the headline optimism index climbed to 104.0 last month, much better than the consensus forecast and fractionally below the 2020 peak hit in February, in turn meaning that small business is the latest area of the economy to experience a V-shaped recovery. Obviously potential issues such as silent evidence and survivorship bias could be over-exaggerating the rebound but the general trend in survey responses still suggests that sentiment has broadly improved compared to earlier this year. For example, nine of the ten main components that make up the headline index strengthened in September, including marked gains in reported earnings trends and confidence in the economic recovery.
The only weak spot was a slight decline in owners’ outlook for credit conditions. This could be related to doubts about additional PPP loan funding making it through Congress anytime soon. Moreover, the rapidly approaching elections are likely why the NFIB Uncertainty Index increased 2 points in September to 92, well above the 75 reading in April when the destructive lockdowns were still in full-effect. None of the near-term political risk, though, appears to have materially hurt small business job creation because total vacancies have already returned to pre-pandemic levels, and reported hiring plans last month even jumped to a nearly 2-year high. More small businesses also raised worker compensation in September and reported plans for additional wage increases in the months ahead climbed to the highest level since Q1. This is to be expected with half of surveyed owners now citing “few or no” qualified applicants to the job openings they are trying to fill. Seeing this particular metric climb to a 7-month high even after the $600 unemployment insurance boost expired also supports our earlier argument that the emergency benefit had yet to meaningfully disincentivize the job search since most Americans are smart enough to prefer long-term job security over a short-term easy income source.