NFIB Data Says It’s Only An Economic Recovery

The recent NFIB survey suggests we are only in an economic recovery, not an expansion. Such was a point I made with Daniel Lacalle in a recent podcast.

While the mainstream media overlooks the NFIB data, they really shouldn’t. There are currently 30.7 million small businesses in the United States. Small businesses (defined as fewer than 500 employees) account for 99% of all enterprises, employ 60 million people, and account for nearly 70% of employment. The chart below shows the breakdown of firms and jobs from the 2019 Census Bureau Data.

NFIB Only Economic Recovery, #MacroView: NFIB Data Says It’s Only An Economic Recovery

The most recent survey for April 2020 is sending some important messages that differ from what we hear from the mainstream media:

  1. The “confidence” of an economic recovery is weak.
  2. Higher wages are not a significant concern.
  3. Businesses aren’t investing due to a lack of “real demand.”

Let’s dig in.

NFIB Shows Confidence Drop

The April survey showed a slight increase in the over “confidence” index to 99.8 vs. 98.2 in March. The reading is substantially lower than the August 2018 reading of 108.8. Notably, despite a year-long economic recovery from the Q2-2020 lows, the level of confidence remains near recessionary levels.

NFIB Only Economic Recovery, #MacroView: NFIB Data Says It’s Only An Economic Recovery

However, given the “noise” of that dataset, we find a more useful gauge of “confidence” in the 12-month moving average. Not surprisingly, given the economy is still struggling with the current recovery, “confidence” remains extremely weak.

NFIB Only Economic Recovery, #MacroView: NFIB Data Says It’s Only An Economic Recovery

The importance of “weak confidence” also affects the “risk” business owners will take concerning capital expenditures, employment, and sales. Importantly, this is a “sentiment” based survey. Such is a crucial concept to understand as “planning” to do something and “doing” it can be very different.

An Economic Boom Will Require Participation

Currently, many analysts expect a massive economic boom in 2021. The basis of those expectations is massive “pent-up” demand as the economy reopens.

I would agree with that expectation had there been no stimulus programs or expanded unemployment benefits. Those inflows allowed individuals to spend during a recession where such would not usually be the case. Those artificial inputs dragged forward future or “pent-up” consumption into the present.

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