American small business owners are not becoming more optimistic with the trends of the nation’s economy.
This week, the National Federation of Independent Business (NFIB) released its Small Business Optimism Index for August 2023, showing a decrease that month, marking twenty straight months that the index has been under the 49-year average of 98.
NFIB revealed that “twenty-three percent of small business owners reported that inflation was their single most important business problem, up two points from last month,” and that “the net percent of owners raising average selling prices increased two points to a net 27% (seasonally adjusted), still at an inflationary level.”
In a statement, NFIB State Director Chad Heinrich said, “For Main Street, inflation has yet to be tamed. Between the pressure on prices and the worker shortage, the challenges of this economy continue to make it difficult to own and operate a small business.”
NFIB Chief Economist Bill Dunkelberg added, “With small business owners’ views about future sales growth and business conditions discouraging, owners want to hire and make money now from strong consumer spending. Inflation and the worker shortage continue to be the biggest obstacles for Main Street.”
The press release issued by NFIB Arizona noted key findings from the Index, including:
Small business owners expecting better business conditions over the next six months deteriorated seven points from July to a net negative 37%, however, 24 percentage points better than last June’s reading of a net negative 61% but still at recession levels.
Forty percent of owners reported job openings that were hard to fill, down two points from July but remain historically high.
The net percent of owners who expect real sales to be higher decreased two points from July to a net negative 14%.
NFIB’s unveiling of its Small Business Optimism Index for August preceded the release of the U.S. Bureau of Labor’s Consumer Price Index, which was published Wednesday. The U.S. Bureau of Labor reported that its Consumer Price Index for All Urban Consumers (CPI-U) “rose 0.6 percent in August on a seasonally adjusted basis, after increasing 0.2 percent in July,” and that “over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.”
The U.S. Bureau of Labor wrote that “the index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase” – as well as “continued advancement in the shelter index, which rose for the 40th consecutive month.” According to the Bureau, “the energy index rose 5.6 percent in August as all the major energy component indexes increased.”
In addition to its Consumer Price Index, the Bureau of Labor also published its Real Earnings Summary on Wednesday, which showed that “real average hourly earnings for all employees decreased 0.5 percent from July to August, seasonally adjusted.”
Arizona Senate President Pro Tempore T.J. Shope reposted a reaction to this week’s economic update, which summarized the August inflation and wages reports. The post, from a Senior Fellow of the Manhattan Institute, said, “I am legitimately baffled by fellow economists who seem to think that a few months of lower inflation negate the 17% price hike since 2021 that continues to outstrip wage growth. Until wages fully catch up, the higher prices will remain a family burden.”
I am legitimately baffled by fellow economists who seem to think that a few months of lower inflation negate the 17% price hike since 2021 that continues to outstrip wage growth.
Until wages fully catch up, the higher prices will remain a family burden. https://t.co/B8rL2Y9aX5
There continues to be a level of optimistic caution from small businesses across the United States as owners weather the current economic environment. On Tuesday, the National Federation of Independent Business (NFIB) released its monthly Small Business Optimism Index, showing an increase of 0.9 of a point in July 2023. That index now sits at 91.9, which, according to NFIB, is the “19th consecutive month below the 49-year average of 98.”
NEW TODAY: @NFIBResearch released its July #SmallBusiness Economic Trends report. Inflation has eased slightly on Main Street, but difficulty hiring remains a top business concern.
NFIB Chief Economist Bill Dunkelberg issued the following statement in conjunction with the report, saying, “With small business owners’ views about future sales growth and business conditions dismal, owners want to hire and make money now from solid consumer spending. Inflation has eased slightly on Main Street, but difficulty hiring remains a top business concern.”
Additionally, the NFIB State Director for Arizona, Chad Heinrich, shared his own thoughts on the new data, writing, “With the state legislature finally adjourned from its regular session, small business owners can continue focusing on operating their businesses without worry of new costly mandates or higher taxes coming from our state government. We are thankful for the pro-small-business legislators willing to stand against job-killing tax increases and regulatory mandates on our small businesses in Arizona.”
The national business organization highlighted some of the findings uncovered by its newly revealed report, including that “owners expecting better business conditions over the next six months improved 10 points from June to a net negative 30%, 31 percentage points better than last June’s reading of a net negative 61% – which is the highest reading since August 2021 but historically very negative;” that “forty-two percent of owners reported job openings that were hard to fill, unchanged from June, but remaining historically very high;” that “the net percent of owners raising average selling prices decreased four points to a net 25% seasonally adjusted, still a very inflationary level but trending down – which is the lowest reading since January 2021;” and that “the net percent of owners who expect real sales to be higher improved two points from June to a net negative 12%, a very pessimistic perspective.”
This NFIB Small Business Optimism Index has only climbed above 100 two times since President Joe Biden walked into the White House in January 2021. During the Trump administration, the Index sat over 100 for most months during the four years of his presidency – with declines during 2020 when COVID-19 decimated the health and structure of businesses around the nation. Earlier this month, President Biden touted his economic record, tweeting, “13.4 million jobs have been added to our economy on my watch. More than any other president in a full 4-year term, and heartening that our economic agenda is creating opportunity for working for families.”
13.4 million jobs have been added to our economy on my watch.
More than any other president in a full 4-year term, and heartening that our economic agenda is creating opportunity for working for families. pic.twitter.com/o3VrhKuySq
The president also boasted of his policies giving a much-needed boost to the American economy, writing, “We have the lowest rate of inflation among the G7, down two thirds from its peak. That’s Bidenomics: growing the economy by creating jobs, lowering costs for hardworking families, and making smart investments in America.”
We have the lowest rate of inflation among the G7, down two thirds from its peak.
That’s Bidenomics: growing the economy by creating jobs, lowering costs for hardworking families, and making smart investments in America. pic.twitter.com/f9AjFm9ZaU
Twitter added a note from readers on this tweet from Biden, providing context to the information shared by the president. The note read: “According to a report released on July 4, 2023, Japan had the lowest inflation rate among the G7 countries in May of that year. The year-on-year inflation for the G7 as a whole fell to 4.6%, with Japan’s rate specifically registering below 3.5%.”
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
On Thursday, the National Federation of Independent Business released its monthly Jobs Report, which found that Arizona is well-positioned to beat its neighbors to full economic recovery.
“Early legislative action this year to enact COVID-19 liability protection for businesses followed by recently adopted, historic tax reforms for income and property taxpayers will feed the flames of optimism and build confidence in business owners–leading to more investment, hiring and growth of small businesses in Arizona,” said Chad Heinrich, Arizona state director for National Federation of Independent Business (NFIB). “While small-business owners remain in a struggle to fill open jobs, in Arizona our small businesses are seeing the support that comes from having a pro-small-business Legislature as our elected officials wrap up business at the State Capitol.”
According to NFIB’s report, 46% of small business owners reported job openings they could not fill in the current period, down two points from May but still above the 48-year historical average of 22%. Small business owners continue to struggle to find qualified workers for their open positions while raising compensation at a record high level.
A net 39% (seasonally adjusted) of owners reported raising compensation (up five points), a record high. A net 26% plan to raise compensation in the next three months (up four points), according to the report.
“In the busy summer season, many firms haven’t been able to hire enough workers to efficiently run their businesses, which has restricted sales and output,” said NFIB Chief Economist Bill Dunkelberg. “In June, we saw a record high percent of owners raising compensation to help attract needed employees and job creation plans also remain at record highs. Owners are doing everything they can to get back to a full, productive staff.”
According to NFIB, “the Jobs Report is a national snapshot not broken down by state. The results were based on 592 respondents to the June survey of a random sample of NFIB’s member firms, surveyed through 6/28/2021.”
