Small business optimism posted a modest decline in November with a reading of 104.8, while continuing its exceptionally strong two-year trend, according to the NFIB Small Business Optimism Index. Slightly more than half of the decline was attributable to Expected Business Conditions and Expected Real Sales. Increases in compensation tied a near 30-year high as owners seek to attract more qualified candidates. An increasing percentage of owners reported capital outlays and higher sales.

“Small business owners are enthusiastic about the economy and have demonstrated their optimism by raising wages, creating new jobs, and investing in their businesses throughout 2018,” said NFIB President and CEO Juanita D. Duggan. “Overall, small business owners have shown a historic trend in optimism for their businesses and the economy and continue to be the driving force behind economic growth.”

When viewing the responses received prior to and after the election, the value of the Index was basically unchanged after the election results were known. For the entire November sample, capital spending and job creation plans improved. Job openings lost four points but remained very strong. Inventory investment plans declined but remained positive as owners reported additions to current stocks. Expected real sales and expected business conditions six months out fell four and 11 points respectively, and the percent viewing the current period as a good time to expand fell one point.

A net 9 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, up one point and historically very strong. Thirty percent or more of the owners in construction, manufacturing, retail and transportation reported quarterly improvements in sales.

Plans to raise compensation rose two points to a net 25 percent, the highest since 1989, a response to persistently high levels of unfilled open positions. Reports of higher worker compensation were unchanged at a net 34 percent of all firms, remaining very strong.

Sixty-one percent of owners reported capital outlays, up two points from October, with 45 percent of those making expenditures, purchasing new equipment (up two points), 22 percent acquiring vehicles (down four points) and 18 percent improving or expanding facilities (unchanged). Twenty-nine percent plan capital outlays in the next three to six months, down one point, but among the strongest readings in the recovery period. Plans to invest were most frequent in manufacturing (34 percent), transportation (32 percent) and the wholesale trades (38 percent).

“Small business employs about half of the private workforce, so investment and training in that sector is critical to improving overall worker productivity over the next five years,” said NFIB Chief Economist Bill Dunkelberg.

As reported in the November jobs report, small business job creation increased slightly, rising to a net addition of 0.19 workers per firm. Sixteen percent of owners reported increasing employment an average of 2.9 workers per firm, unchanged from October, and 11 percent reported reducing employment and average of 1.9 workers per firm. Matching the August 2018 record high and up two points from last month, 25 percent of owners cited the difficulty of finding qualified workers as their “Single Most Important Business Problem.”