Small business sentiment as measured by the NFIB showed an unexpected decline in November, falling from 96.1 down to 94.8. Economists had been expecting an increase to 96.4. This was the largest monthly decline for small business sentiment since June, and took the headline index back below its historical average of 96.1 going back to 2000. Looking at the chart below, sentiment has been steadily declining since last December when it peaked at 100.4. This is not necessarily the type of action you want to see heading into what will be the first rate hike by the Federal Reserve in nearly a decade.
In each month’s NFIB report, small businesses are asked to select their number one problem from a list of issues. The results of this month’s survey are shown to the right. In this respect, the report wasn’t so bad. For starters, the percentage of businesses citing Poor Sales as their number one problem declined from 12% down to 9%, which is the lowest reading since December 2007. Of the components that saw increases this month, Quality of Labor and Cost of Insurance both saw increases of two percentage points. From a worker standpoint, the increase in companies citing Quality of Labor is a positive as it indicates that employers will have to offer higher wages to attract higher quality workers. That being said, even after this month’s increase in the percentage of employers citing Quality of Labor, this component is still below the cycle high it set two months ago at 16.