Morning Note: What’s troubling small business owners?

Being that small businesses account for ~2/3rds of U.S. jobs, we take them seriously, In fact, the NFIB Small Business Optimism Index accounts for three of the forty-nine inputs to our PWA Macro Index.

Specifically:

Headline Optimism Score


Hiring Plans


Capital Expenditure Plans


The May survey was released this morning, and while overall optimism, as well as capex plans essentially paused last month (down 0.2 points, and flat, respectively) , the all important hiring plans component jumped notably (up 6 points [that’s bullish]). 

Overall, “five of the survey’s ten components improved, three declined and two were unchanged.”

One might think that with the economy opening back up and with folks out there satisfying their pent up demand for all things not online, that small business optimism would be soaring.

Well, the survey’s second paragraph sums up nicely what has owners a bit hesitant:  emphasis mine…

“The labor shortage is holding back growth for small businesses across the country,” said NFIB Chief Economist Bill Dunkelberg. “If small business owners could hire more workers to take care of customers, sales would be higher and getting closer to pre-COVID levels. In addition, inflation on Main Street is rampant and small business owners are uncertain about future business conditions.”

Fascinating to read “labor shortage” when job openings sit at a whopping 8.1 million. We can assume that the jobs setup will change markedly once the extra unemployment benefits stop coming. The inflation comment comports with our present macro thesis…


Asian equities struggled overnight, with 10 of the 16 markets we track closing lower.

Europe, on the other hand, is fine so far this morning, with 15 of the 19 bourses we follow presently in the green.

U.S. stocks are mixed to start the day: Dow down 57 points (0.16%), SP500 down 0.01%, SP500 Equal Weight down 0.22%, Nasdaq 100 up 0.36%, Nasdaq Comp up 0.38%, Russell 2000 up 0.36%.

The VIX (SP500 implied volatility) is up 2.44%, VXN (Nasdaq i.v.) is up 0.05%.

Oil futures are down 0.77%, gold’s down 0.48%, silver’s down 0.85%, copper futures are down 1.10% and the ag complex is up 0.89%.

The 10-year treasury is up (yield down) and the dollar is up 0.16%.

Led by MP (rare earth miner), solar stocks, ag futures, metals miners, ALB (lithium miner) and tech stocks — but dragged by financial stocks, AT&T, Mexican equities, Verizon, silver and materials stocks — our core mix is off 0.11% to start the session.


Given the times we live in, I can’t emphasize enough the following from Leon Levy’s essential book The Mind of Wall Street:

“…prosperity leads to its own decline by ultimately producing speculative excesses. As good times roll along, people lose sight of risk (and often justify the change with talk of a “new economy”).”


Have a great day!
Marty
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