U.S. NFIB Small Business Optimism Index (August 2021)

Admir Kolaj, Economist  | 416-944-6318 

Date Published: September 14, 2021 

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NFIB Small Business Optimism Index improves in August

  • The National Federation of Independent Business' (NFIB) small business optimism index rose by 0.4 points to 100.1 in August. The headline print was slightly better than market expectations, which called for a pullback to 99.0.
  • Five of the ten subcomponents improved on the month, four fell and one remained unchanged. Plans to increase inventories (+5 points to 11%) and plans to make capital outlays (+4 points to 30%) were up on the month. Even expectations for higher real sales improved a touch (+2 points to -2%). 
  • When it came to the strength of future business conditions, however, small business owners continued to lose confidence. Expectations for an improvement in the economy fell 8 points to -28% – the lowest level since 2013. The belief that now is a good time to expand, meanwhile, retreated for the second consecutive month, falling 2 points to 11%.
  • The survey's labor market indicators continued to point to strong demand. The share of firms with unfilled job openings increased by one point to 50%, setting a new record. The share of firms planning to increase employment surged five points to 32% – also a new record. Other indicators pointed to difficulty in hiring workers. The share of firms with 'few' or 'no qualified' applicants rose three points to 60%, while 'quality of labor' concerns remained top of mind at (+2 points to 28%). The readings for the last two indicators also marked new record highs in August.
  • Businesses continued to place a heavy focus on wage increases in order to attract and retain workers. The share of firms increasing worker compensation rose three points to 41% (a new record), while those planning to do so fell one point to a still-elevated 26%. This was accompanied by an elevated share of firms raising average selling prices (+3 points to 49%) and those planning to do so (unchanged at 44%), with both of these indicators near the highest levels since the 1970s.

Key Implications

  • The key takeaway from today's NFIB report is that even as expectations for future business conditions weakened, demand for labor remained unperturbed. This is evidenced by new record highs in job openings and plans to increase employment. Finding qualified workers continues to prove difficult, with indicators of labor supply challenges also at record highs.
  • The end of pandemic-related enhanced unemployment benefits on Labor Day for half of states that hadn't done so prematurely, may help improve the availability of labor as it nudges more workers off the sidelines. Still, with hiring difficulties related to the quality of labor (and not just quantity), this is unlikely to be a game-changer in the near-term. Evidence that points to little difference in hiring patterns between states that ended the enhanced unemployment benefits prematurely and those that did not, echoes this narrative (see here).