Your Paycheck In 2027: Will You Get A Raise Or Get Laid Off? | Holly Wade

Holly Wade (0:00)

We ask a question, what's your single biggest challenge in operating your business? And one in five say that inflation is their biggest issue. But a quarter of them are saying that labor availability, so it's still a very tight labor market. Far more are having to increase compensation than are planning for it. Trying to make sure that they retain talent, it's a very competitive field out there for many of them.

David Lin (0:24)

This video is disseminated on behalf of Greenland Mines. When we talk about the US economy, we often focus on Wall Street and big corporations' earnings. But small businesses actually account for roughly 44% of private sector GDP and employ more than 62 million Americans. So how are these businesses really doing? Will they be raising prices soon because of higher fuel costs? Will wages rise or fall next year? And are businesses replacing staff with AI?

The National Federation of Independent Business or NFIB has tracked small business sentiment for over 50 years. Their Optimism Index is widely followed by economists, hedge fund managers, analysts, even politicians and policy makers alike. Joining us now is Holly Wade from NFIB.

She's the Executive Director of Research, and she's going to answer the most important questions on what small businesses are doing right now and what mainstream is telling us about the economy. Welcome to the show, Holly. Good to see you.

Holly Wade (1:23)

Thank you for having me. Great to see you too.

David Lin (1:25)

The NFIB Optimism Index is a really important indicator for economists and traders and investors. It's often used as a leading indicator for consumer sentiment, consumer discretionary spending, and ultimately what businesses are about to do when it comes to hiring, potentially firing, and capital allocation. Let's start by talking about the headline number that came in in September. Optimism fell 0.8 points just under the 52-year average of 98 So before we get started with examining the trends, tell us about how the Optimism Index is measured to begin with. What does it actually capture?

Holly Wade (2:02)

Sure. So our headline measure of the health of the small business economy, as you mentioned, the Optimism Index, it is 10 components within our survey.

Ten questions. Most of them are looking forward. So whether they're planning to hire capital spending plans, inventory plans, sales expectations, forward-looking indicators are dominant in the index. And in September, we did see, as you mentioned, a deterioration, but we are now about at the 52-year average of the index. So that's generally what we're looking at. The two main deteriorations within those 10 components were related to outlook. So how they're feeling about business conditions and expansion opportunities, and both of those declined quite a bit.

David Lin (2:54)

If I were to pull up the... Let me just show on my screen here. This is the NFIB Optimism Index, the headline number here.

People can go to your website for a more detailed breakdown. I just have this in front of Trading View, and I'm going to overlay this with the stock market, and there is a very close correlation. If you look at it from a stock market growth perspective, I know that doesn't show exactly right now, but if you were to look at the growth numbers of the stock market, so 2022, for example, was a bad year, 2008, of course, was a bad year, it looks like optimism more or less tracks the market. Is that a fair assumption to make?

Holly Wade (3:32)

Relatively speaking, yes, they do tend to follow each other a bit. However, on Main Street, the conditions there are often very different than the markets, and especially as of late, those the challenges that small business owners are facing versus the huge investments that are going into some of these larger companies.

David Lin (3:54)

What are small businesses concerned about primarily right now?

Holly Wade (3:58)

Right now, a lot of it is related to inflation. So we ask a question, what's your single biggest challenge in operating your business? And one in five, 20% say that inflation is their biggest issue in operating their business.

But a quarter of them are saying that labor availability is still a very tight labor market for a lot of small business owners trying to fill historically high levels of open positions. And so while there's still that kind of low hire, low fire environment out there in the labor market, the low hire for some business owners is because they aren't able to find applicants to fill those positions. And that's very industry specific. So whether that's in construction, manufacturing and some services, they're really having a hard time finding people to expand their workforce and to capture market opportunities that they see available to them.