Small-business sentiment retreats from 45-year high NFIB says

The numbers: The National Federation of Independent Business small-business optimism index fell 0.9 point in September to a seasonally adjusted level of 108.8.

What happened: In September, six index components declined, three gained, and one was unchanged. Job creation, capital spending, and actual sales all rose in September.

“This is the longest streak of small business optimism in history, evidence that tax cuts and regulatory rollbacks are paying off for the economy as a whole,” NFIB President Juanita Duggan said in a statement. “Our members say that business is booming and prospects continue to look bright.”

Index component	Seasonally adjusted level	Monthly change
Plans to increase employment	23%	-3
Plans to make capital outlays	30%	-3
Plans to increase inventories	3%	-7
Expect economy to improve	33%	-1
Expect real sales higher	29%	3
Current inventory	-1%	2
Current job openings	38%	0
Expected credit conditions	-5%	1
Now a good time to expand	33%	-1
Earnings trends	-1%	-2

Big picture: In August, NFIB’s gauge hit the highest level in the 45-year history of the index. September’s slight downturn was the third-highest reading on record.

The “hard” index components — plans to increase employment, capex and inventories — were responsible for most of the decline in September.

Read: The reward for the lowest unemployment rate since 1969? Higher rates for your loans

That’s a reversal from last month, when the NFIB was touting index gains it said were “dominated by real business activity that makes GDP grow: job creation plans, job openings, strong capital spending plans, record inventory investment plans, and earnings. Small business is clearly helping to drive that 4% growth in the domestic economy.”

What they’re saying: After August’s release, Josh Shapiro, chief U.S. economist for MFR, Inc., noted the index component that asks about compensation changes “provides a pretty good leading indicator” of official government data on wages.

“Viewed on a smoothed 3-month moving average basis, the NFIB measure is signaling accelerating gains in wages and salaries in the months ahead, and most recent readings are particularly strong as small business owners cite severe shortages of qualified workers,” Shapiro said.

In September, nearly two-thirds of survey respondents reported hiring or trying to hire, but 53% said there were “few or no qualified applicants.”

“Quality of labor” was respondents’ single biggest business problem, followed by taxes — in spite of the 2017 tax cuts that made business owners so giddy.

Also see: Construction hiring is booming — and there still are plenty of available jobs

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