Economy

Small Business Confidence and Hiring Stalls in October

Jon C. Ogg

Published: November 10, 2015 11:35 am

Last Updated: January 13, 2020 5:20 pm

The case for optimism might not be bad when it comes to small businesses, but the case is far from looking more positive. The National Federation of Independent Business (NFIB) has released its Small Business Optimism Index for October, and it effectively showed no real change after September’s 0.2% gain and a 0.5% gain in August.

The results from this survey are taken from data that were collected from the survey in October 2015. According to the NFIB, a sample of 10,799 small-business owners or members was drawn with 1,411 usable responses received (with a response rate of 14%).

NFIB’s chief economist, Bill Dunkelberg, said:

The October NFIB survey gave no indication of a resurgence in growth in the small business sector with the Index remaining below the 42 year average of 98. The labor market components might have held at historically strong levels but this time owners reported no net growth in employment, which is a significant drop from reports in the previous four months.

The index components that made up an effective “no change” came from the following:

• Plans to increase employment, 11%
• Plans to make capital outlays, 26%
• Plans to increase inventories, 0%
• Expects economy to improve, -4%
• Expects real sales higher, 4%
• Current inventory, -4%
• Current job openings, 27%
• Expects credit conditions, -5%
• Now a good time to expand, 13%
• Earnings trends, -16

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With economist so worried about jobs and inflation, 24/7 Wall St. focused on the NFIB commentary around jobs, prices and earnings.

Labor markets:

Reported job creation came to a halt in October, with owners adding a net 0.0 workers per firm in recent months. Fifty-five percent reported hiring or trying to hire (up 2 points), but 48 percent reported few or no qualified applicants for the positions they were trying to fill. Fourteen percent reported using temporary workers, unchanged from September. Twenty-seven percent of all owners reported job openings they could not fill in the current period, unchanged from September.

Profits and wages:

Earnings trends deteriorated 3 points, falling to a negative 16 percent. Far more owners are reporting profits lower quarter to quarter than higher. A seasonally adjusted net 21 percent of owners reported raising worker compensation, down 2 points from September and 4 points below the expansion high reading reached in January and May. The net percent planning to increase compensation rose 1 point to 17 percent, still strong for this recovery.

Inflation:

Seasonally adjusted, the net percent of owners raising selling prices was 2 percent, up 1 point from September. This is bad news for the Federal Reserve which is trying to stoke the flames of inflation in order to prevent deflation from setting in. For the rest of us, low inflation is good news. Seasonally adjusted, a net 14 percent plan price hikes (up 1 point). If history repeats, this will be offset by unplanned reductions in selling prices.

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