NFIB's April optimism report

I prepared a brief examination of the NFIB's report the day after it was published in April.  I'd like to share it now and hopefully receive comments as I prepare to examine this month's report.  Advice or corrections in my examination are more than welcome as well as some thoughts about factors that ought to be taken into account or data that looked useful but may not be.

Thanks,

Jordan

NFIB's Small Business Economic Trends Report

The National Federation of Independent Business published a report yesterday with news that is somewhat discouraging, which may contribute to a self sustaining downward spiral.  The trend highlighted is a decline in small business optimism in the moth of March.  Of course, using this report to predict bad news for small business is not likely to increase optimism in April.

The raw data collected by the NFIB over the last 40 years is certainly valuable in understanding business owner trends at least in the context of their polling methods.  Their indicators are specific and well chosen figures such as how many employees were hired, fired, or left of their own accord and whether business owners plan to take loans.  However, their interpretation may be a little biased.

These melancholy reports and predictions seem to lose sight of the that fact their optimism index has dropped every month of March since at least 2008.  Furthermore, though January's optimism index is a little below the average for Januaries since 2008, both February and March are above the average for those months since 2008.  

It's also worth noting a trend that really does lend credibility to a less positive outlook: 2013's first quarter is almost a full 4 points less optimistic than the first quarters of 2011 and 2012.  The NFIB data shows a sharp drop from October at 93.1 to November at 87.5.  All we can say for sure is that the member businesses of the NFIB were generally discouraged by events in November, but their attitudes are steadily recovering as evidenced by the data. 

Finally, only 4 percent of business owners polled think it is a good time to expand substantially.  It seems to me that those business owners, if they act on their feelings, are going to find themselves a step ahead of the rest as confidence continues to climb (despite this predictable, single-month dip) and people realize it's safe to do business.  The NFIB's own observations (such as increasingly available investment capital) really do indicate a business-friendly situation.