Small business confidence in the US reached its highest point in nearly 3-1/2 years in November, according to the National Federation of Independent Business (NFIB). The surge follows the recent presidential election and Republican control of Congress.
The NFIB Small Business Optimism Index saw a significant jump of 8.0 points, reaching 101.7 last month. This marks the highest level recorded since June 2021. The result aligns with expectations from economists, given the traditionally Republican leanings of small business owners. This positive shift echoes improvements seen in other post-election sentiment surveys, such as the University of Michigan’s consumer surveys, although responses often varied along party lines.
One of the most striking findings is the 41-point increase in the number of small business owners who anticipate economic improvement. This surge, reaching 36%, represents the largest jump since June 2020. Moreover, the proportion of businesses viewing the current climate as favorable for expansion reached levels unseen in nearly 3-1/2 years.
Positive expectations extend to sales growth, with more businesses anticipating increases. Conversely, fewer businesses now cite inflation as their primary concern. Reflecting this improved outlook, the survey’s uncertainty index plummeted 12 points from October’s record high of 110.
Despite the optimistic outlook, challenges remain, particularly in the labor market. Small businesses, especially in transportation, construction, and professional services, continue to grapple with labor shortages. While the percentage of businesses intending to hire increased by 3 points to 18% – the highest in a year – finding qualified workers remains a hurdle.
Construction workers on a job site.
To attract and retain employees, 32% of owners reported raising compensation, a slight increase from October. Looking ahead, the proportion planning compensation increases in the next three months rose significantly by 5 points to 28%, the highest recorded this year. Furthermore, about 28% of businesses plan to raise prices, up 2 points from October. According to NFIB Chief Economist Bill Dunkelberg, wage increases are crucial for retaining current employees and filling open positions.
In conclusion, the November NFIB survey reveals a significant surge in small business confidence following the election. While optimism abounds regarding economic improvement, sales growth, and expansion, labor shortages and the need for wage increases persist as key challenges. The coming months will reveal whether this newfound confidence translates into sustained economic growth for small businesses.
