Conditions in small US business sector remain 'grim', economists say

Small business sentiment in the US edged up last month with their hiring plans returning to their levels from before the onset of the Covid-19 pandemic, according to the results of a closely-followed survey.

Yet some economists remained wholly unconvinced.

The National Federation of Independent Business's confidence index rose from a reading of 98.8 for July to 100.2 in August.

That was better than the 99.0 that economists had penciled-in.

A seven point improvement in a sub-index linked to earnings expectations drove the increase, alongside three point gains in subindices for hiring plans and jobs-hard-to-fill.

Ian Shepherdson at Pantheon Macroeconomics said the reported recovery in hiring plans was "impossible" to square with other data, such as that from the Homebase small business figures on employment.

He pointed to the state of flux that the small business indicator found itself in and the much bigger pool of data used by Homebase as the reasons behind the inconsistencies.

The Homebase data had also proven a good guide to the official non-farm payrolls number over recent months, Shepherdson said.

"Note too that the NFIB’s “good time to expand” measure remains depressed, at not much more than half its pre-Covid level, and the recent trend is about flat.

"This is not a diffusion measure, so right now it probably is a better guide to the - grim - state of the small business sector than the hiring numbers."