In October, small business optimism in the U.S. experienced a more significant rise than anticipated, driven by the aftermath of the recent presidential election and despite an unprecedented level of uncertainty. The latest survey released by the National Federation of Independent Business indicated that the NFIB small business optimism index climbed 2.2 points to reach 93.7, exceeding expectations which forecasted a modest increase to 91.9.
Nevertheless, this figure represents the 34th consecutive month of readings below the 50-year average of 98. The uncertainty index also saw a sharp increase, gaining seven points to settle at 110 for October. However, following the conclusion of the presidential election, there is a prevailing sentiment that small business owners are likely to experience a reduction in uncertainty regarding future economic conditions.
Bill Dunkelberg, Chief Economist at NFIB, emphasized this sentiment in a statement, suggesting that optimism is likely to improve as business owners adjust to the current political climate. With Donald Trump's election victory marking a return to the presidency, parallels are drawn with Trump's first term in 2016, when small business optimism significantly surged in anticipation of a more favorable business environment.
Admir Kolaj, an economist at TD Economics, noted in his report that while the economic landscape faces distinct challenges today, an overall improved mood among small business proprietors is expected as the year closes. Despite the optimism, persistent challenges remain. The NFIB report highlighted that 23% of small business owners flagged inflation as their primary concern, a figure that has remained stable since September.
Additionally, 20% cited labor quality as their top issue, followed by 8% who pointed to labor costs as their primary concern. Dunkelberg remarked that while optimism is rising, small businesses are contending with significant economic hardships, such as low sales, unfilled job openings, and ongoing inflationary strain.
Owners, however, maintain a sense of hope as they approach the holiday season. The survey revealed that a net negative 20% of owners reported an increase in nominal sales over the past three months, marking the weakest level since July 2020. Conversely, those predicting higher real sales volumes escalated to a net negative 4%, which is the highest reading recorded for 2024.
Additionally, 35% of business owners reported having job openings that they were unable to fill, reflecting a one-point increase from September’s record low readings. As for compensation, a net 31% of owners indicated that they were raising pay on a seasonally adjusted basis, marking a decline of one point from September.
The NFIB noted that the last time the compensation increase was recorded this low was back in April 2021. Also, a net 23% expressed intentions to raise compensation within the next three months, a figure that has remained unchanged since September..