The NFIB Small Business Optimism Index rose 0.5 points in August to 100.8, nearly three points above the 52-year average of 98. Based on these findings alongside a new survey from NFIB, small business optimism is improving once again.
“Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” said NFIB chief economist Bill Dunkelberg in a news release. “While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”
Of the 10 Optimism Index components, four increased, four decreased and two were unchanged. The increase in those expecting real sales to be higher contributed the most to the rise in the Optimism Index, according to the NFIB. The Uncertainty Index fell by four points to 93 but remained well above the historical average. The decline was due to a decrease in uncertainty about financing expectations and planned capital expenditures.
“Minnesota’s small businesses are sharing in the national optimism, but key challenges remain,” said NFIB Minnesota state director Jon Boesche in the release. “While sales expectations are up, the ongoing labor shortage continues to be a top concern. The state’s workforce development efforts must align with the needs of our small businesses to maintain this positive momentum.”
Small Businesses Report Difficulties with Job Openings
As reported in NFIB’s monthly jobs report, a seasonally adjusted 32% of all small business owners reported job openings they could not fill in August, down one point from July. The last time unfilled job openings fell below 32% was in July 2020. Twenty-eight percent had openings for skilled workers (down 1 point), and 13% had openings for unskilled labor (up 1 point).
The difficulty in filling open positions is particularly acute in the construction, manufacturing and transportation industries, according to the NFIB. Nearly half (49%) of small businesses in the construction industry had a job opening they could not fill, down six points from July and 11 points below last year’s level. This suggests a softening in the job market. Openings were the lowest in the wholesale and finance industries.
A seasonally adjusted net 15% of owners plan to create new jobs in the next three months, according to the NFIB, up one point from July and the third consecutive monthly increase, a positive trend but historically low.
Of the 53% of owners hiring or trying to hire in August, 81% reported few or no qualified applicants for the positions they were trying to fill, according to the NFIB. Twenty-six percent of owners reported few qualified applicants for their open positions (down 3 points), and 17% reported none (down 2 points).
Finding Quality Labor a Significant Concern
In August, 21% of small business owners cited labor quality as their single most important problem, according to the NFIB, unchanged from July and remaining the top single most important problem. Labor costs reported as the single most important problem for business owners fell one point from July to 8%.
Seasonally adjusted, a net 29% reported raising compensation, according to the NFIB, up two points from July. A seasonally adjusted net 20% plan to raise compensation in the next three months, up three points from July.
Fifty-six percent of small business owners reported capital outlays in the last six months, up one point from July, but remaining historically low, according to the NFIB.
Of those making expenditures, 37% reported spending on new equipment, 22% acquired vehicles and 17% improved or expanded facilities. Thirteen percent spent money on new fixtures and furniture and 5% acquired new buildings or land for expansion, according to the NFIB.
Small Businesses See Inventory Gains
A net negative 9% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, according to the NFIB, unchanged from July.
The net percent of owners reporting inventory gains rose two points to a net negative 6%, seasonally adjusted. Not seasonally adjusted, 10% reported increases in stocks and 14% reported reductions, according to the NFIB. A net 0% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in August, up three points from July. A net 1% (seasonally adjusted) of owners plan inventory investment in the coming months, unchanged from July.
Over half (54%) of small business owners reported that supply chain disruptions were affecting their business to some degree, down 10 points from July, according to the NFIB. Three percent reported a significant impact (down 1 point), 15% reported a moderate impact (down 2 points), 36% reported a mild impact (down 7 points) and 44% reported no impact (up 8 points).
Looking forward to the next three months, seasonally adjusted, a net 26% plan to increase prices, according to the NFIB, down two points from July. The net percent of owners raising average selling prices fell three points from July to a net 21%, seasonally adjusted, the lowest reading of this year. Unadjusted, 33% of owners reported higher average prices and 13% reported lower average selling prices. Eleven percent of owners reported that inflation was their single most important problem in operating their business (higher input costs), unchanged for the third consecutive month.
The frequency of reports of positive profit trends improved three points from July to a net negative 19% (seasonally adjusted) in August, according to the NFIB. Among owners reporting lower profits, 37% blamed weaker sales, 18% cited the rise in the cost of materials, 10% cited price change for their product(s) or service(s) and 9% cited labor costs. Among owners reporting higher profits, 65% credited sales volumes, 18% cited usual seasonal change and 5% cited higher selling prices.
Uneasy Business Conditions
Four percent of owners reported that financing and interest rates were their top business problem in August, according to the NFIB, unchanged from July. Twenty-three percent of all owners reported borrowing on a regular basis, down two points from July. The last time the percent of business owners borrowing on a regular basis was below 23% was in November 2021. A net 3% reported their last loan was harder to get than in previous attempts, down one point from July. A net 6% reported paying a higher rate on their most recent loan, up one point from July. In August, the average rate paid on short maturity loans was 8.1%, down 0.6 points from July and the lowest reading since May 2023.
The net percent of owners expecting better business conditions fell two points from July to a net 34% (seasonally adjusted), according to the NFIB. In August, 14% (seasonally adjusted) reported that it is a good time to expand their business, down two points from July.
Seventeen percent of small business owners reported taxes as their single most important problem, according to the NFIB, unchanged from July and ranking as the second top problem. The percent of small business owners reporting government regulations and red tape as their single most important problem rose one point to 9%. Five percent reported competition from large businesses as their single most important problem, down one point from July.
