Economy

Small Business Optimism Dips in September

Old-fashioned Main Street
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The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for September fell 0.8 points from 96.1 in August to 95.3. The October reading is five points below the pre-recession average from 1973 to 2007.

Three of four “hard” measures of the index were lower month-over-month: the job creation index, job openings and capital spending plans. The fourth, inventory investment plans, rose one point. The job openings and capital spending measures were down a combined 10 points and accounted for all the decline in the total index score.

In September small business owners identified their most important problems as government regulations and red tape, taxes and poor sales. Only taxes scored higher in September 2014 than in 2013. The quality of labor score decreased year-over-year from 10 points to 9.

The NFIB’s chief economist said:

Small businesses just can’t seem to get out of second gear. In order for the Index to get back to the average, responses to the 10 Index component questions would have to improve 50 percentage points cumulatively. … Overall, small business owners are still stuck in a rut that has been difficult to escape.

The NFIB reports that 21% of business owners currently have positions open that they are unable to fill (down 5% compared with August) and that 42% said there were few or no qualified applicants for the open positions.

ALSO READ: Jobless Rate Still Above 10% in Several Cities

Wages and earnings slipped two points to a net negative reading of 19. The August reading of -17 was the best since 2007. Some 18% of small businesses reported that compensation costs rose while none reported a drop. A total of 15% of employers plan to raise compensation costs in the next few months, unchanged from August’s reading.

The NFIB noted, “The reported gains in compensation are still in the range typical of an economy with reasonable growth, but the reversal was disappointing (for employees) as it signals weaker labor demand and soft labor markets.”

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