The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for November fell from 107.4 in October to come in at 104.8. The August index reading of 108.8 was the highest in the 45-year history of the index. The consensus estimate from economists had called for the November index to slip to 107.

The percentage of business owners who now expect the economy to improve in the next six months fell from 33% in October to 22% in November. The percentage who expect sales to rise over the same period dropped from 30% to 26%. The NFIB also noted that the November election results had no significant impact on survey responses.

Some 34% of small business owners reported raising employees’ pay in the past three months. That’s unchanged on a seasonally adjusted basis compared with October and down slightly from September’s all-time high 37%. Since January of 2017, net compensation changes have increased by three percentage points. Some 25% of small business owners are planning to raise wages in the next three months, up two points month over month and a record-high level.

The four “hard” measures of the index posted mixed results last month. The month-over-month job creation component remained flat at 22%, the job openings component dropped four points to 34%, capital spending plans dipped a point to 29% and plans to increase inventory investment fell three points to 2%.

For 2017 the average monthly index was 104.8, the highest ever. The previous annual record was 104.6 set in 2004. For the first 11 months of this year, the average is 106.9.

NFIB President and CEO Juanita Duggan commented:

Small business owners are enthusiastic about the economy and have demonstrated their optimism by raising wages, creating new jobs, and investing in their businesses throughout 2018. Overall, small business owners have shown a historic trend in optimism for their businesses and the economy and continue to be the driving force behind economic growth.

In its commentary on the October report, the NFIB noted:

Spending (supported by increased government outlays, tax cuts, reduced regulatory costs, a lower saving rate, and solid employment gains) has eliminated excess capacity and now growth depends on increasing labor force participation and productivity gains through training and investment in new capital. Reports of unfilled job openings and few qualified job applicants are at record levels. Owners report raising compensation at record rates to attract new workers. … Small business employs about half of the private workforce, so investment and training in that sector is critical to improving overall worker productivity over the next five years. In the meantime, continued spending demand will put pressure on capacity and prices, keeping the Federal Reserve ready to raise interest rates to try to keep demand from outstripping our capacity to produce which would produce more inflation.

Some 38% of business owners reported job openings they couldn’t fill. More than half (53%) reported few or no qualified applicants for available jobs. A record high 25% of business owners said finding qualified workers is their single most important business problem.

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