By Jill Mislinski

The latest issue of the NFIB Small Business Economic Trends came out this morning. The headline number for September came in at 101.8, down 1.3 from the previous month. The index is at the 79th percentile in this series.

Here is an excerpt from the opening summary of the news release.

The small business Optimism Index maintained a historically solid reading, but took a dip in September, falling 1.3 points to 101.8. September’s figure falls within the top 20% of all readings in the Index’s 46-year history. The survey shows no sign of a recession and indicated continued job creation, capital spending, and inventory investment, all consistent with solid, but slower growth. The Uncertainty Index rose 2 points, revisiting high levels of concern.

“As small business owners continue to invest, expand, and try to hire, they’re doing so with less gusto than they did earlier in the year, thanks to the mixed signals they’re receiving from policymakers and politicians,” said NFIB President and CEO Juanita D. Duggan. “All indications are that owners are eager to do more, but they’re uncertain about what the future holds and can’t find workers to fill the jobs they have open.”

The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example, the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings following the Great Recession that ended in June 2009.

Here is a closer look at the indicator since the turn of the century.

NFIB Optimism Index Since 2000

The average monthly change in this indicator is 1.3 points. To smooth out the noise of volatility, here is a 3-month moving average of the Optimism Index along with the monthly values, shown as dots.

NFIB Optimism Index Moving Average

Here are some excerpts from the report.

Labor Markets

Job creation was firm in September, with an average addition of 0.10 workers per firm compared to 0.19 in August. Net job creation has faded steadily since February’s 0.52 workers per firm to 0.1, no surprise as “finding qualified workers” to fill job openings hit a record high of 27 percent in August. Finding qualified workers remains a top problem, with 23 percent reporting it as their number one problem, down 4 points from August’s record high.

Inflation

How effective has the Fed’s monetary policy been in lifting inflation to its two percent target rate?

The net percent of owners raising average selling prices fell 3 points to a net 8 percent, seasonally adjusted, the lowest reading since 2017.

Credit Markets

Has the Fed’s zero interest rate policy and quantitative easing had a positive impact on Small Businesses?

Two percent of owners reported that all their borrowing needs were not satisfied, down 2 points, revisiting the record low. Thirty percent reported all credit needs met (down 1 point) and 53 percent said they were not interested in a loan, up 1 point.

NFIB Commentary

This month’s “Commentary” section includes the following observations and opinions:

Mumblings about a coming recession (or at least weaker growth) are becoming more prevalent, and this is contagious. The NFIB measure of uncertainty is edging up, rising 6 points over the past 3 months. This means that more owners are unable to confidently make a statement, good or bad, about the future of economic conditions. As more owners become unsure, caution will seep into business decisions.

Business Optimism and Consumer Confidence

The next chart is an overlay of the Business Optimism Index and the Conference Board Consumer Confidence Index. The consumer measure is the more volatile of the two, so it is plotted on a separate axis to give a better comparison of the two series from the common baseline of 100.

NFIB Optimism and Consumer Confidence

These two measures of mood have been highly correlated since the early days of the Great Recession. The two diverged after their previous interim peaks, but have recently resumed their correlation. A decline in Small Business Sentiment was a long leading indicator for the last two recessions.

Original post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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2019-10-08