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NFIB Small Business Optimism Index increased by 0.9 points to 92.5
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Owner sentiment increased by 0.9 points to 92.5, a dismal reading as has been the case since the recovery started. Over half of the improvement was accounted for by the labor market components which is certainly good news, lifting them closer to normal levels. Expected business conditions though deteriorated further - lots of dismal views of the economy coming next year. The Index has stayed in a “trading range” between 86.4 and 95.4 since the recovery started, poor in comparison to an average reading of 100 from 1973 through 2007.
GDP growth was unexpectedly strong, but most of that was inventory building, with some more exporting. Domestic sales grew only 1.9 percent, more in tune with other measures of how well the economy is doing. Inflation was low as expected from the NFIB data as few are raising prices. Employment was better at the end of the year, as the NFIB indicators anticipated – but not enough to restore 2007 levels of employment, six years later. The only item in small business owners’ “top 10” list of issues is that energy prices are falling. So unfortunately, not much to be optimistic about.
There is a hint that owners are getting an inkling of what Obamacare might mean for labor costs, concern about the cost and availability of insurance bumped up 3 percentage points after a long period of no real change. Small firms aren’t currently required to provide insurance (this could change in the future of course), but many do. These owners may find their insurance plans “unacceptable” to Obamacare and be obliged to either pay more for the coverage or abandon it and pay the benefit in cash. This will certainly be a source of angst and confusion in 2014.
The year is not ending on a high note in the small business sector of the economy. The “bifurcation” continues, the “Fortune 500” are performing well with the stock market hitting record high levels. But the small business sector is showing little growth beyond that driven by population growth. Since January 1st, the S&P has added $3.8 trillion in value – but have output and profits really increased that much? Or is this the work of the Federal Reserve which has voted to leave rates unchanged in the last 39 meetings, and likely adding to this total in December. Maybe fiscal policy will get on course and give owners something to cheer about.
Posted: December 10, 2013 Tuesday 07:30 AM