Small Business Owners Grow More Confident About the Year Ahead

Small business is thinking big. 

In a survey published Tuesday, the National Federation of Independent Business (NFIB) said its small-business optimism index jumped in December to 99.5, up from 99 the month before and above its long-term average of 98. So what’s got Main Street feeling so rosy all of a sudden? 

Small Business, Big Dreams

Well, lots of reasons, as it turns out. For one thing, the rise in optimism is inversely correlated to a decrease in uncertainty, which spiked through last spring and summer amid the White House’s tariff tussles. Speaking of: The US Supreme Court could rule as soon as today on the legality of the president’s tariffs-via-emergency-order play. Either outcome would only provide more certainty moving forward, though a blow against the tariff regime would likely be welcome for small business owners who cited taxes and inflation as their first and third most important issues. 

Their second-most cited issue moving forward? Finding quality labor — and it’s here where the NFIB typically provides its most useful indicator:

• 19% of respondents said finding quality labor was the biggest challenge they faced, just a point behind “taxes.” Meanwhile, 33% of respondents said they had job openings in December that they were unable to fill, with nearly half of owners saying they found few or no qualified candidates for open positions.
• The unfilled job openings rate remains well above the historical average of 24%, though it has improved somewhat in the past year. The NFIB survey is typically an accurate predictor of the US Bureau of Labor Statistics’ monthly non-farm payroll jobs report.

If Any Indication: Also well above historical norms? You guessed it: selling prices. A net of 30% of owners said they increased selling prices in December. That’s down from 34% in November, but above the historical average of 13%. The inflation indicator was mirrored in the Consumer Price Index report also released Tuesday by the US Bureau of Labor Statistics. In December, the CPI rose to 2.7%, while the core CPI, which excludes food and energy costs, rose 2.6%. The bottom line? “In the near term, inflation will run hotter than policy makers would like, so we expect the Fed to pause this month and possibly in March … For now, the balance of risks tilts toward the weakening labor market,” Jeffrey Roach, chief economist for LPL Financial, told The Daily Upside.