The NFIB Small Business Optimism Index was little changed in March at 101.8 from 101.7 in February and 101.2 in January. The decline in confidence for small businesses evident in the final months of 2018 appears to have settled swiftly to a level consistent with solidly expansionary conditions rather than the more heated readings in place since December 2016. If the index is off the historic highs that peppered the prior two years, it still represents stronger activity than at any time since before the Great Recession.
The index components displayed only small moves overall and ones well within normal month-to-month variation. Four were higher, three lower, and three unchanged. This suggests that underlying conditions are relatively stable. The three unchanged were in expectations for the economy to improve, expectations for higher sales, and capital expenditure plans — all forward looking and all pointing to moderate, stable growth.
If there are concerns about an economic slowdown on the horizon, it was not reflected in the components related to the labor market. Plans to increase employment in March rose 2 points to 18%, in line with recent months. Current job opening rose 2 points to 39% in March, matching the record high of 39% in December. The subcomponent of actual compensation rose 2 points to 33% in March, not much different than the readings that dominated 2018. Continued plans to increase payrolls and accepting that it will be more costly to do so indicates that small businesses have not been too shaken by the downgrade in activity and are forging ahead.
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