Not All Bad For Small Businesses

This morning, the NFIB released their monthly reading on the small business sector. With case counts rising throughout November, small business optimism took a hit. Compared to September and October’s identical readings of 104, November’s reading fell to 101.4. Although that is lower, it remains above the levels seen from March through the summer. Additionally, there were several silver linings in this month’s report.

Glancing across the various components and sub-indices of the report, breadth was pretty mixed. Of the ten components of the headline number, six fell and the remaining four were higher. Of the other indices that are not inputs to the headline number, half of the indices were higher while another two were unchanged, and the other two were lower.

As for the most pressing problems reported by small businesses, there was little change overall. Quality of labor remains the most widely reported problem, stealing share from those reporting the cost of labor as the biggest issue.

The second biggest issue, and the only other one to see an uptick in November, was taxes. Perhaps due to the results of the election and the prospects of higher taxes down the road, the percentage of respondents reporting taxes as the most pressing issue rose 3 percentage points to 20%.

Taking a deeper dive into the individual components of the report, the various indices concerning employment metrics were pretty strong in November. The index for actual employment changes remains negative, meaning more businesses reported declines in employment rather than increases, yet that is not to say businesses are not looking to gain employees.

For starters, a higher number of responding firms (34% vs. 33% in October) reported that they had at least one unfilled job opening in November. That is in the top decile of all historical readings. Breaking that number down further, the NFIB highlighted that 29% of those were for skilled workers and 13% were for unskilled workers.

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