The July jump in small business optimism momentum lasted precisely one month.
Small Business Optimism Dips in August
The NFIB reports Small Business Optimism Dips in August
The NFIB Small Business Optimism Index fell by 2.5 points in August to 91.2, erasing all of July’s gain. This is the 32nd consecutive month below the 50-year average of 98. The Uncertainty Index rose to 92, its highest level since October 2020. Inflation remains the top issue among small business owners, with 24% of owners reporting it as their top small business operating issue, down one point from July.
Key NFIB Findings
- The frequency of reports of positive profit trends was a net negative 37% (seasonally adjusted), seven points worse than in July and the lowest since March 2010.
- Twenty-four percent of owners reported inflation as their single most important problem in operating their business, down one point from July.
- The net percent of owners expecting higher real sales volumes fell nine points in August to a net negative 18% (seasonally adjusted). Real sales volume expectations were the largest contributor to the decline in the Optimism Index along with earning trends and expected business conditions. [Mish note: real means inflation-adjusted]
- A seasonally adjusted net 20% plan to raise compensation in the next three months, up two points from July.
- The net percent of owners raising average selling prices fell two points from July to a net 20% seasonally adjusted.
NFIB Lead Comment
“The mood on Main Street worsened in August, despite last month’s gains,” said NFIB Chief Economist Bill Dunkelberg. “Historically high inflation remains the top issue for owners as sales expectations plummet and cost pressures increase. Uncertainty among small business owners continues to rise as expectations for future business conditions worsen.”
Commentary Snips
The last two months have been wrought with political turmoil in the U.S. But on Main Street, it seems to be business as usual. No major change in owner optimism as the Optimism Index remains well below the 50-year average. The outlooks for sales and business conditions are at historically low levels and continue to get worse. Consumer sentiment (Survey of Consumers, Univ. of Mich.) continues to drift lower, but consumer spending resists joining the “slowdown” parade. Manufacturing remains weak and housing and construction are catching its slowdown. Inflation is closer to 2 percent but not there. However, it is close enough for the Federal Reserve to commit to starting interest rates cuts. Reports of price and wage hikes are falling in frequency but remain historically on the high side with plenty of room to fall. Government spending and hiring remain strong, the “legs” of any fourth quarter growth that might occur.
The Uncertainty Index rose to its highest level since October 2020 (98), rising 2 points from July to 92, 19 points above the January reading and 10 points above June. Clearly, “uncertainty” has been on the rise! The Fed’s commitment to cut interest rates should have been a calming factor, so it’s probably not to blame. Aggregate spending and inflation have been fairly stable, but reports of the net percent with higher sales now rivals what was last seen in the 2020 and 2008 recessions. And the stock market is expressing some unease. Internal strife over foreign policy is strengthening, “family fights,” and the election is just weeks away. Expect more volatility in everything in the coming months.
Labor Markets
In NFIB’s August survey, 40 percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up 2 points from July. Thirty-six percent have openings for skilled workers (up 4 points) and 15 percent have openings for unskilled labor (down 1 point). The difficulty in filling open positions is particularly acute in the transportation, construction, and manufacturing sectors. Job openings in construction were up 5 points from last month and over half of the firms (60 percent) have a job opening they can’t fill. Openings were the lowest in the agriculture and finance sectors. A seasonally adjusted net 13 percent of owners plan to create new jobs in the next three months, down 2 points from July. Overall, 62 percent reported hiring or trying to hire in August, up 5 points from July.
Small Business Credit Conditions
Small Business Real Earnings
This is interesting. It seems that real (inflation-adjusted) earnings are always going down.
That may be hard to believe, but 35 percent of small business startups fail every year. Most of the rest struggle with regulations, minimum wage hikes, and competition from Costco, and big chains.
Progressive states like California and Illinois add to the misery.
NFIB Single Most Important Issue
The three most important issues, in order, are inflation, quality of labor, and taxes.
This should play into Trump’s wheel.
Small Businesses Reducing Workers for the Last Four Months
On September 5, I noted Small Businesses Reducing Workers for the Last Four Months
ADP data shows small businesses with 1-49 workers have been reducing workers for four months. Those with 20-49 workers have shed workers for 7 straight months.
Q: Does the NFIB survey refute those numbers?
A: No, for two reasons
First, the NFIB survey shows intent, not results. If the quality of labor is deemed poor, businesses won’t hire just to fill a spot.
Second, and I believe more important, the NFIB survey is a diffusion index. One business hiring one person will offset another letting 5 workers go.
Using the above as an example, the diffusion index for four businesses hiring one person and a fifth letting five workers go would result in a +3 not a -1 score.
The McKelvey Recession Indicator Triggered, But What Are the Odds?
In case you missed it, please see The McKelvey Recession Indicator Triggered, But What Are the Odds?
Many eyes are on the McKelvey recession indicator. Too many? That would probably be the case if everyone believed it.
Heck, most of my own readers don’t seem to believe it. I have the odds well over 50 percent that a recession is underway. Click on the above link for discussion.
I believe that as fast as the jobs are being ‘created’ (death/retirement), they are being destroyed (streamlining/outsourcing/downsizing/right sizing/ hyper efficiency tactics).
That is the real reason, along with the fact that the banks or not lending, that we are not seeing wage growth relative to costs.
31 Million Excess Deaths, Infant mRNA Inoculations and the 5th Dimension
You may already know that between 2020 and 2023 there were 31 million excess deaths.
You may also know some of largest spikes in death rate occurred as the vaccines were being rolled out.
Indeed you may even know that all viruses, including SARS Covid-19 are fictions. There has never been any scientific evidence that any virus exists.
In the face of this knowledge what is your response to the Centre for Disease Control (CDC) September 6 recommendations that infants between 6 months and 4 years receive regular shots of Covid-19 vaccines?
https://www.zerohedge.com/news/2024-09-11/31-million-excess-deaths-infant-mrna-inoculations-and-5th-dimension
I hate/like to harp on this … but throw in the disabilities associated with the injections…. and that is a LOT OF JOB OPENINGS!!!!
I rejected the injections so I have no problem with seeing this … those who injected… well… I can understand how you would prefer to continue to not see this.. to pretend it does not exist.
not related to main article
Fast, you and I are on the EXACT SAME PAGE on the Scamdemic. My basis was/is TWO-FOLD:
“SHHHHH [as she closed my Private Room’s swinging door] DO NOT BELIEVE WHAT YOU ARE SEEING AND HEARING IN THE NEWS. THERE ARE NONE!”
And, she slipped out, after swearing me to silence. THAT WAS IT FOR ME and my wife, who was THERE in July/AUG 2020.
We refused the Vaccines, and never had a symptom of a Flu or any other issue. IT WAS ALL A SCAM to prove to themselves that they could create a world wide panic with nearly 95% COMPLIANCE.
The 5% who did not buy it were shouted down, and we lost no fewer than 6 different couple friends who were our most liberal and we no longer see them. One of those couples was my Best friend and BEST MAN in my wedding and we no longer connect, after having a nearly 45 year relationship.
The scam was terrible on us.
The trillion dollars in new debt every few months and government making up new jobs to pad the numbers… is papering over the rot.
Who knows what else the Fed is doing that we are not being told about … that is keeping this dying civilization alive.
Clearly you do whatever it takes… when you are facing total collapse… anything that delays the implosion… is a good thing.
Imo, adding to the debt, especially huge amounts to the already enormous debt only puts the country in a deeper hole, a bigger risk of widespread poverty. So I don’t think more debt is a good thing. We’d have to live with austerity and lean times for a while but making big spending cuts immediately would just as soon get us on track to recovery, and make people in other countries more optimistic about our future as well.
How do you service the already immense debt under austerity policies?
Austerity = degrowth
You’re right, there needs to be specifics. I haven’t tried crunching any numbers but a few sources say debt interest is 900 billion a year and tax revenue is 4.4 trillion. So we bring in 1/4 of the interest in taxes maybe. It seems like with big spending cuts and big tax hikes it is feasible, but I could use clarification on how it would need to work and the effects. Well I think the degrowth wouldnt be permanent. Getting things back to a stable foundation would eventually channel capital and labor into more efficient production of real goods and services that would slowly but sustainably turn growth back to positive. It would be tough but not as tough as losing the country and what could replace it.
The leading chart shows declining small business sales for the past 2.5 years. NEVER in the history of this data series have conditions been this bad and a recession not been called. Biden-Harris was handed a nice COVID recovery in 2021 and proceeded to squander it with bad economic policies and government spending.
The Republicans are equally responsible for putting us in this hole and just in case anyone is misinformed or believing the propaganda, the answer is NOT more deficit spending and debasement of the dollar, rate suppression by the Fed. That’s the whole problem that got us here and only makes it worse.
Well one thing is for sure, over the next ten years the American middle class will be decimated by corrupt government policies and reckless spending. I read the following at the beginning of Irving Fisher’s booklet on debt deflation and is seem so appropriate to today’s situation.
“Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works.” – Mr. John Mills
Examples of hopelessly unproductive work, would include
Endless wars,
DEI
Open borders
Bad education,
Policies that reward bad behavior in the lower and upper classes.
…
That’s a good economic quote, agree on that. Discrimination was law and did oppress a lot of people for a long time in the USA and elsewhere around the world and through history people have been persecuted, so I can understand the spirit and purpose of DEI.
I can’t. The end result has been the total erosion of competence in the workforce and among corporate leadership, the destruction of accountability. And it has not moved the needle one bit on “equality” either, which is about par for the course as regards liberal social engineering.
Basically it just managed to make everything worse.
Does anyone ever question Treasury sales – which prop up the economy? They seem infinite. I recall a statement years ago that US borrowing would far exceed available capital on earth – and we’re w-a-y beyond that. There seems to be no end to the appetite for US debt ever. No auction ever fails. Interest rates drift down as a response to eager buying of ceaseless debt.
That’s because a very large amount of debt has been “bought”, though not in the normal sense of the word, by the US central bank, with money created out of nowhere, money not backed by real goods and services, which has caused so much debasement of the dollars value. So a lot of that eager buying/demand was not by real people with real money. For those unfamiliar, the Fed governors are appointed by the president and confirmed by the Senate, so voting for the Republicans and Democrats is supporting rate suppressing dollar debasement. The people of the country need to tell the we’ll no longer vote for them if they continue this because it’s bad both now and for the future.
Hi Mish,
According to you we’re in recession.
But on the other end of spectrum there are not bad or good news too.
https://images.mauldineconomics.com/uploads/pdf/20240909_OMS_landing-Slok.pdf
Are you biased?
I know its difficult to mention all.
How do you solve?
Not trendy. Does not provide the addictive doom and gloom buzz.
Being in the front end of a recession is different to being in the middle, or the back end of a recession–different factors come into play, as leads and lags, as it spreads, depending on the causes and complications of the downturn. Some things will look rosy, others a disaster in the making.
Employment is correlated with GDP for obvious reasons–you can’t produce it, if you don’t employ the labor first.
As for other ‘views’, some of the data at mauldin/Apollo are plain misleading, wrt relevancy and time periods covered–maybe cherry picking.
What I’ve been doing, and what I see Mish doing, is looking for long term, well defined data series that have clear track record of sending actionable signals near the beginning of known prior recessions. Pedigreed data, accurately measured and not imputed from models, with the link to recessions grounded in economic principles, not “Oasis world tours” or Super Bowls, nor based on fantasy mental models.
The problem is that there are non-estimated stats these days which show conflicting information. Mish has shown some stats that skew negative but there are others which are positive – for example: wage tax withholding, unemployment claims, real time spend data, all of which are real-time or near real time, not estimates, and are positive, if not strongly positive.
Certainly one cannot ignore the fact that there has been softening in the economy but from an overall perspective, given the conflicting data, it seems to me that most likely near-to-medium term outlook is a continuation of an “OK” but not great economy, with probably some additional gradual softening. At some point we will definitely have a recession, it just doesn’t seem to me that one has already started or is imminent.
Torsten was on Bloomberg Surveillance yesterday. Good link, thanks.
Hope and Joy. HOPE AND JOY
I’m trying to understand what is a predictive value of this series, if any? If you look at the charts, they all basically have the same trend going on for almost two years now, while the earnings one shows the basically the same downward slope since almost 2018 and has been well into negative territory for a very long time. I would think that for there to be some predictive value, one would need to see some delta to the current trend.
At a guess, the economy was beginning to deteriorate back in 2018. See ‘Sales’ and ‘Business Earnings.’ And yes, a lot of predictive value, however, who knows when the bubble will burst?
Risk averse and rational, IMHO, it was time to prepare one’s exit from risk-assets. In early 2018, gold bottomed around $1200, An average for the period was around $1,250.
BTW I was sure Covid was the infamous ‘swan’; but throw enough money into the fire and it gets smothered for a while. The blaze afterwards though, might be a true conflagration.
Here’s evidence why Kamala’s small business plan is a crock.
“,,,35 percent of small business startups fail every year…”
It is interesting to note what small businesses consider as the reason for failure, Anyone see ‘competence’ listed? How about ‘Lack of innovation?’
Competition causes failure, just as it causes improvement, and dare I say it, innovation, in a few limited instances.
Small businesses excel in ‘me too.’ It’s ‘monkey see, monkey do, too’ time. It doesn’t much matter whether it’s goods or services, retail, or construction, or whatever. ‘Me too’ businesses compete at the lowest level of the ‘food chain.’ Maybe if they differentiate with better customer service, advertising effectiveness, or simply location, they might have a chance of standing apart from the crowd in the short term. Why short term? Because if Sue’s Dry-cleaning down the road get more business by 10% off for seniors, you can be sure My-Dry, Quick Clean… will do the same, or similar.
BTW, the absolute-last thing government should do is stir the cluster fudge of small business by handing out welfare to ‘me too’ on a DEI basis. All it is is a subsidy to bankruptcy.
36% have opening for high skilled workers. Higher wages cause inflation. Defects, projects delays and return for credit darkens the mood of small businesses. The 1-49 are not firing. They can’t find enough workers, bc the 50-500+ are getting them first. Inflation and the low quality of labor are small businesses biggest headaches. But it’s well below the peak. Many other problems, like poor sales, finance, insurance and gov regulations, have been resolved.
FYI, higher wages, if the result of higher productivity, do NOT cause inflation. Never has. Never will.
Now, what causes defects and delays? Tick tick tick…. A lack of responsibility for what one does, which is the direct result of a dependency culture. Closely associated is increasing dissatisfaction, and the ability to make good decisions. Hence the ‘return for credit.’
labor shortages cause inflation. It will get worse. Demand for low skilled workers is up 15%. Training them will take time. They cost more bc they scruu more.
Extending your argument, any time demand or supply change the result must be inflation or deflation? That would apply to any and all labor market, any commodity, real estate, capital….
Yes. The “wage-price spiral” is complete BS. It has been known for a long time what causes inflation and increase of wages isn’t it. The cause is monetary (and fiscal).
“NFIB Single Most Important Issue”
Inflation: 24
Quality of Labor: 21
I’d argue these two are strongly linked and the fundamental cause is the same, too many people leaving the labor force (10,000+ per day). Less labor = higher labor cost and of course quality costs. Not enough young people but even if there were, they have a totally different attitude and perspective on work.
It will only get worse not better. There are at least half a dozen guys I work with that are all getting ready to retire over the next couple of years, many aren’t even in their 60s.
My wife comes home and tells me they had a retirement party for x this week and she does this weekly.
Wait till we have 80m boomers on ss & medicare in 2030, smart people have seen this train wreck coming years away and planned accordingly.
Good observation
Quality of labor is also related to the strength of the economy. When times are good, quality labor is harder to find. When times are bad, quality labor is easier to find. The fact that quality of labor is a less important problem vs a year ago and the survey high is a reflection of a weakening economy.
This ‘stuff’ didn’t just happen. It was years in the making. A dependency society is both cause, and result. Dependency feeds on itself. Too may handouts. Too much control by government. Too much letting the government decide for you…. DO it long enough, when SHTF, the hands all go out for freebies.
Demand for highly skilled workers is rising. Gen alpha is 30/40 millions short. Higher wages, higher tax collection, even with lower tax rates to billionaires like u, who will
invest in good quality co and banks. Gov debt will be cut by 30%. Inflation > the front end of the yield curve. Negative rates will be back.The 10k who retire each day are scruuwed.
Now, knowing this, which is all true btw, how would you ‘innovate’ and build a successful business/work force?
Depends on the company and what its products are.
Wherever possible companies must automate more and more things to reduce not only labor cost but dependency on high quality labor skills.
If I was starting a small business nowadays, I’d be thinking esop as a way to solve a lot of labor issues and justify an investment in recruiting and training employees.
Tim has a good perspective but think about what is happening in society.
Retail stores – go scan & bag yourself.
Airport – go check in at kiosk, tag your own bags then deposit them on the conveyor all yourself.
Fast food – use the kiosk to order and someone will call your name with your stuff.
Hotels – you have to beg or be an elite member to get your room cleaned daily, waiting for the day they start charging for cleaning room service.
I went to the doctor the other day and all the forms were electronic on my mobile because the doc & his staff don’t want to pay someone to type it in from paper to online.
Future business models are going to be “kits” to fix your own issues/problems. I expect a dental kit out soon where you scrape & clean your own teeth because there won’t be enough dental hygienists or dentists around.
The same for plumbers, electricians, carpenters, etc. Airlines want to whittle down the cockpit to just one pilot and no co-pilot because the computer flies the plane anyway.
By 2030, Americans will be living in a third world environment but paying first world prices for everything. This is what a demographic death spiral looks like…Plan accordingly.
Print this and stick on forehead, or elsewhere. A lot of innovation, and with increased productivity in many cases.
https://upload.wikimedia.org/wikipedia/commons/thumb/2/29/Gold_Star.svg/1024px-Gold_Star.svg.png
Seriously, though, is it really a demographic death spiral? Or is it an adjustment to post-industrialism in preparation for increases in robotics etc. If we go down this route, what happens to the unemployable? Do we make welfare available only after sterilization?
Trend may have reached its limit. California recently banned grocery self-checkout except for 15 items or less, at least according to Safeway…
As labor becomes scarce, service comes at a premium, but we haven’t yet re-harvested millions of potential teen and 20-something workers who used to be regular members of the workforce in prior decades.
Young people don’t want those jobs and there isn’t enough of them anyway. do the research then do the math, it won’t add up.
The US has moved beyond private enterprise to corporate capitalism. Corporate chains have category killed everything that is profitable.
Small business cannot make a profit anymore.
The barons own the market and the serfs supply the labour