The National Federation of Independent Business (NFIB) released its November read on small business sentiment this morning with the report showing a modest uptick in optimism. The headline index rose from 91.3 to 91.9, but as shown below, that remains at historically low levels.

Across the individual categories of the survey, breadth was mixed with six of the ten inputs to the optimism index moving higher month over month. Multiple sub-indices sit in the bottom decile of their historical ranges, while a handful of others, namely those centered around employment and inflation, are more elevated.

One index that has been well below historical norms has been the outlook for general business conditions (top left chart below). That index plummeted since the fall of 2020 (likely in large part thanks to the political sensitivities of this survey), and the rebound over the past few months hasn’t been enough to bring it back up to pre-pandemic record lows. Alongside that rebound, there has been only a very minor jump higher in the share of respondents reporting now as a good time to expand.

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As we noted in today’s Morning Lineup, employment metrics in aggregate significantly slowed last month. Hiring plans fell 2 points down to 18; the weakest reading since February 2021. On the net, there have also been more firms reporting declines than increases in employment. Given companies appear to be pulling back on hiring, the lowest share reported job openings are hard to fill since April 2021. Not only does it appear that firms are hiring less, but they are also raising compensation less. Both indices for compensation and compensation plans fell sharply in November.

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Inventories are yet another area of jarring declines last month. On net 4%, more companies reported plans to decrease inventories in the next three to six months making for the lowest reading on inventory accumulation since the depths of the pandemic: April 2020. While there is the potential silver lining that the decline in the reading is a result of improvements in supply chain pressures, it is paired with obvious deterioration in demand. Given this, for the first time since the spring of 2020, a higher share of respondents are reporting their current inventory levels are too high versus too low.

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