Small Business Optimism Dips in December; Remains Historically Strong in 2019

AUSTIN (Jan. 14, 2019) — Small business optimism ended the year historically strong, with a reading of 102.7, down 2 points from November.

Nationwide, seven of 10 components fell, two improved, and one was unchanged. An increased number of small business owners reported better business conditions and expect higher nominal sales in the next three months. While the frequency of plans to raise compensation fell 2 points, it remains one of the highest readings in the survey’s 46-year history. Small businesses continued to hire and create new jobs with actual job creation matching November’s reading, the highest since May.

State-specific data isn’t available, but NFIB State Director Annie Spilman said, “Small business owners here say their biggest hurdle when it comes to adding jobs is finding enough qualified applicants. We supported legislation in 2019 creating a grant program at the Texas Workforce Commission to provide paid on-the-job training, but that is only a first step. We will continue working with our elected officials to find a legislative solution that helps people develop the skills they need to fill the jobs that are out there.”

NFIB Chief Economist William Dunkelberg said, “2020 is starting out with a solid foundation for continued growth, two-years into the Tax Cuts and Jobs Act that’s providing fuel to grow small businesses and their workforce.”

Although the NFIB Uncertainty Index rose 8 points in November to 80, owners expecting better business conditions increased 3 points to a net 16%. A net 9% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, 3 points above the average reading for 2019. The net percent of owners expecting higher real sales volumes increased 3 points to a net 16% of owners, bouncing back from November’s weak reading. Actual sales volumes are strong, and owners are a bit more certain of future sales growth.

The net percent of owners raising average selling prices rose 2 points to a net 14%, seasonally adjusted, continuing a measured upward trend since September. Unadjusted, 10% (up 2 points) reported lower average selling prices and 20% (up 3 points) reported higher average prices.

The current focus and noise in Washington, D.C. around impeachment is having little, if any, impact on small business owners, no different than during the Clinton impeachment proceedings. The Index showed little variation over the 1998-99 period that included the pre-impeachment news coverage, the impeachment proceedings, and its aftermath. The initial 2019 path is starting in a similar fashion, albeit at a stronger position.

As reported in last week’s NFIB’s monthly jobs report, a seasonally-adjusted net 19% plan to create new jobs, down 2 points. Finding qualified workers remains the top issue for small business owners, with 23% reporting this as their number one problem. A net 29 percent, seasonally adjusted, reported raising compensation (down 1 point) and a net 24% plan to do so in the coming months, down 2 points.

“What really matters to small business owners are issues directly impacting their bottom lines. Currently, their biggest problem is finding qualified labor, surpassing taxes or regulations,” said Dunkelberg. “Two years ago, Congress and the President provided real, significant tax relief to small business owners. Now owners are anxious to have their tax cuts made permanent.”

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