The NFIB report is outstanding
If you missed it, the NFIB US small business sentiment report was out earlier and it hit an all-time record at 108.8 but most of the details were even more impressive.
The note at the top of the survey captures the reason for optimism about the economy:
"The August Index has more 'muscle' than any past reading. The 'hard' component of the Index (job creation plans, job openings, capital spending plans, inventory plans, and earnings) soared to a historic record reading of 107.9. This caps a change in the complexion of the Index which was dominated by the 'soft' components (inventory satisfaction, good time to expand, expected business conditions, sales expectations, and expected credit conditions) at the beginning of the record run that started in December 2016, but is now driven by the spending and hiring components, generators of GDP growth."
The one caveat -- as it always seems to be -- is planned and actual wage rises. On further planned increases, just a net +21 believe they will raise wages in the year ahead, which is down from +24 in January and only slightly higher than it was in 2011. Actual wages are higher and near cycle peaks but there's a strange disconnect that will either keep wages stubbornly low or force companies to re-adjust their expectations.
Should companies decide they need to compete more aggressively for talent, that could set of a round of wages hikes that push up expectations and mark the start of a cycle that would force the Fed to raise rates above neutral.
There are signs that's coming. The survey asks respondents about the single-most important problem they face and here were the results:
Again, you could argue here that they have to pick something and they can't exactly complain about taxes after the big cut at the start of the year. Still, I think it's inarguable that some companies really are having great difficulty finding staff and that's a big tailwind for wages.
