Indicators in Focus: Will sagging small business sentiment improve?

Indicators in Focus examines measures of business and economic activity that will tell the story of 2022.

As Brad Jones looked toward 2022 in the waning days of 2021, he kept a close eye on small business sentiment.

Jones is Missouri director for the National Federation of Independent Business, an advocacy organization for small businesses. The NFIB conducts a survey each month to assess economic trends and gauge the sentiments of small business owners. One part of the monthly survey asks whether those owners expect business conditions to improve over the next six months.

Recently, respondents have been bearish.

Owners expecting better business conditions decreased to a net negative 38% in November, tied for the lowest reading in 48 years. The indicator has declined 18 points over the past four months to its lowest level since November 2012.

Hear more: Part 2 of a look at key 2022 indicators from the Market Dives podcast

Jones said small business confidence is decreasing because of a familiar culprit: labor shortages.

“You’ve got over 50% of our small businesses out there that actually have job openings,” Jones said. “And you know, that’s a problem, when you don’t have people to come to work.”

Business confidence is important because it can signal the likelihood of economic growth, Jones said. When business confidence is high, businesses are more likely to invest in technology and labor, increasing economic growth and decreasing unemployment. When it’s low, they are likely to save money and scale back costs, decreasing investment and laying off workers.

Reporter Emily Hood contributed to this story

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