The U.S. small business optimism eased slightly in the month of December. The NFIB’s small business optimism index dropped 2 points to 102.7 in December, coming in below consensus expectations of a flat print. The fall was widespread with seven of the ten subcomponents dropping on the month, one remaining unchanged and only two rising.
The fall was led by drops in earnings trends and current inventory. Most of the labor market subcomponents also dropped in December. Companies planning to increase employment and current job openings dropped 2 points and 5 points to 19 percent and 33 percent, respectively.
Job creation remained stable at a sound 0.29 workers per firm. However, finding qualified workers continued to be a major concern among small businesses, in spite of some easing last month. The percentage of companies with ‘few or no qualified applicants’ for their job openings and ‘quality of labor concerns’ fell by 3 points each to 50 percent and 23 percent, respectively – near the top of the historical range. The share of companies increasing compensation saw slight change, dropping by one point to 29 percent. The share of companies ‘planning’ to raise compensation dropped 2 points to 24 percent.
The remainder of indicators came in mixed. The share of companies expecting increase in real sales and a rebound in the economy both rose three points each to 16 percent. However, expectations that now is a good time to expand and capital outlay plans worsened. The uncertainty index rose again by 8 points to a level of 80.
“The softening of the confidence measure in December can also partly be attributed to elevated uncertainty. But, with phase one of the trade deal to be signed shortly, easing tensions between the U.S. and China (at least temporarily), could provide some added ease of mind for businesses that seek to make capacity-improving investments, at a time when the labor market is exceptionally tight”, said TD Economics in a research report.