The latest issue of the NFIB Small Business Economic Trends is out today (see report). The May update for April at 94.5 is 2 points above the March number. This is the best month-over-month increase in 18 months. The index hit this level previously in February of 2011. For a higher score, we have to look back to December 2007, the month settled on by the NBER as the beginning of the last recession.
Here is the opening summary of the report:
The Index of Small Business Optimism gained 2 points to 94.5 in April, a nice gain on an absolute basis. This month’s Index is the highest reading since December 2007, the peak of the last expansion. That’s the good news. The bad news is that April’s gain is the same as it was in February 2011 proving a year with no real gains. No surprise, since nothing much happened during that time that would make owners more optimistic about the future.
The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings of the past three years. The NBER declared June 2009 as the official end of the last recession.
Profits and Wages
Elsewhere in the report we learn that,
"Reports of positive earnings trends improved a stunning 11 points to a negative 12 percent in April, the best reading since April 2007. The improvement was driven by the best sales trend reports since April 2007. Profits are the major source of capital for financing hiring and expansion for small firms, making this a very welcome development. Three percent reported reduced worker compensation and 18 percent reported raising compensation, yielding a seasonally adjusted net 14 percent reporting higher worker compensation, the highest reading in 39 months and unchanged from March."
Business Optimism and Consumer Confidence
The next chart is an overlay of the Business Optimism Index and the Conference Board Consumer Confidence Index. The consumer measure is the more volatile of the two, so I've plotted it on a separate axis to give a better comparison of the volatility from the common baseline of 100.
With the latest NFIB data, we see that small business confidence has regained the level at the start of the last recession while consumer confidence remains below that level.
