Source: Economics Group of Wells Fargo Bank, N.A. Summary Economic Headwinds Weigh on Small Business Sentiment Small business owners have remained broadly pessimistic through an apparent period of U.S. economic resilience. The Small Business Optimism Index ticked down slightly in October to 90.7, marking nearly two years that the index has remained below its longer-term average. The outlook for near-term business conditions also remained depressed, reflecting a mix of deteriorating sales traffic, reduced credit availability, lower earnings and limited availability of labor. As small businesses struggle to find the workers they need, compensation pressures appear to be mounting, which may present a challenge to the Fed’s goal of achieving sustained 2% inflation.
Poor Labor Quality Depresses Optimism
- The Small Business Optimism Index ticked down 0.1 point in October, continuing a 22-month streak of historically low business sentiment.
- Concerns about labor availability remain top of mind for small business owners. The October survey found 43% of owners reported job openings that were hard to fill in October, an increase from two months prior.
- Poor labor availability seems to be depressing hiring. Hiring plans ticked down a hair in October but have largely stalled since the start of the year. Meanwhile, October was the seventh consecutive month that a greater share of small businesses reported shrinking their payrolls than expanding headcounts.
- Consistent with a trend decline in inflation, fewer small business owners reported raising compensation in October’s survey (36%) than one year ago (44%). Yet as businesses struggle to find workers, the percent expecting to raise compensation rose to a net 24%, the second highest reading this year. READ FULL ARTICLE >>