The shrinking optimism — The National Federation of Independent Business — Small Business Optimism Index has dipped over the past three months, hitting its lowest point since late 2012. This suggests a generally downbeat outlook.

Hiring Plans Cooling — a particularly interesting detail is the recent decline in the survey’s measure of planned hiring. Historically, changes in this measure have closely mirrored changes in actual job growth.

– As there are two ways to view this:

• Pessimistic View: The low number of small businesses expecting to hire (excluding the pandemic’s initial shock) could signal a slowdown in future job growth.

• Optimistic View: While the hiring measure is low, it’s still historically decent, suggesting a potential cooling, but not a collapse, in job growth.

But to our view we shouldn’t rely solely on the NFIB data as a predictor of job growth. And mainly;

1) The historical correlation between the NFIB hiring measure and actual job growth has been inconsistent. Historically, changes in hiring plans have aligned with actual hiring, but this hasn’t been true since the pandemic.

2) The recent gap between hiring plans and sales expectations is unusual during a strong growth period.

3) These discrepancies might be related to the recent surge in business startups following the pandemic. We know from other data that new business establishment has risen significantly.

However, our research suggests this new business formation has contributed to high job openings for small businesses, compared to pre pandemic levels. Importantly, these high openings are in the segment with the most NFIB members (companies with less than 10 employees).

The NFIB survey might be reflecting increased competition for talent from these new entrants. Existing businesses could be experiencing muted sales growth expectations while simultaneously facing hiring competition, leading to higher job openings.

If these new firms are underrepresented in the NFIB data, actual hiring might be higher than hiring plans suggest…

General disclosures: This research is for our clients only. Other than disclosures relating to World Trade Securities, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst’s judgment. World Trade Securities conducts a global full-service, integrated investment banking, investment management, and brokerage business. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and principal trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, principal trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. We and our affiliates, officers, directors, and employees will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research, unless otherwise prohibited by regulation or World Trade Securities policy. The views attributed to third party presenters at World Trade Securities arranged conferences, including individuals from other parts of World Trade Securities, do not necessarily reflect those of Global Investment Research and are not an official view of World Trade Securities. Any third party referenced herein, including any salespeople, traders and other professionals or members of their household, may have positions in the products mentioned that are inconsistent with the views expressed by analysts named in this report. This research is focused on investment themes across markets, industries and sectors. It does not attempt to distinguish between the prospects or performance of, or provide analysis of, individual companies within any industry or sector we describe. Any trading recommendation in this research relating to an equity or credit security or securities within an industry or sector is reflective of the investment theme being discussed and is not a recommendation of any such security in isolation. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current options and futures disclosure documents which are available from World Trade Securities sales representatives.

© 2023 World Trade Securities. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The World Trade Securities L.P team.