Rushmore State News

The NFIB Small Business Optimism Index increased by 0.5 points in August, reaching 100.8, which is almost three points higher than its long-term average of 98. The latest report from the National Federation of Independent Business (NFIB) shows mixed results among the index’s ten components, with four increasing, four decreasing, and two remaining unchanged. The most significant contribution to the rise came from owners expecting real sales to be higher. Meanwhile, the Uncertainty Index dropped by four points to 93 but stayed above historical averages due to reduced uncertainty about financing expectations and planned capital expenditures.

“Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” said NFIB Chief Economist Bill Dunkelberg. “While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”

In South Dakota, Jason Glodt, State Director for NFIB South Dakota, commented on the findings: “The increase in small business optimism is visible if you walk many of South Dakota’s Main Streets. The focus on reducing government red tape, combined with the recently passed small business tax relief give our entrepreneurs the freedom to reinvest and grow.”

Survey data showed that 14% of business owners rated their business health as excellent (up one point), while 54% called it good (up two points). Reports of fair health dropped to 27%, down four points from July; poor ratings were unchanged at 4%. Labor quality remained a persistent challenge—21% cited it as their most important problem.

Job openings also reflected shifts in the market: 32% of all owners reported job openings they could not fill during August, a decrease of one point from July and marking the lowest level since July 2020. Within specific industries such as construction, manufacturing, and transportation, unfilled positions were particularly common. In construction alone, nearly half (49%) had open jobs they couldn’t fill—a decline both from July and year-over-year figures.

Looking ahead, a seasonally adjusted net 15% plan to create new jobs over the next three months—an increase for the third consecutive month but still historically low. Of those hiring or trying to hire last month (53%), most reported challenges finding qualified candidates: 26% saw few qualified applicants (down three points), while 17% reported none (down two points).

Compensation trends indicated a slight uptick: a net 29% reported raising compensation (up two points), and a net 20% plan increases in coming months (up three points). Capital outlays were reported by 56%, though this remains below typical levels seen before recent economic shifts.

Inflation continues to affect small businesses—11% said it was their single most important operating problem for the third month in a row—and supply chain disruptions affected more than half of respondents in some way during August.

On financial matters, only four percent named financing and interest rates as their main problem; regular borrowing fell by two points to 23%, matching lows not seen since November 2021. The average rate paid on short maturity loans decreased by 0.6 percentage points to reach its lowest since May 2023.

Business conditions going forward showed mixed signals: the net percentage expecting better conditions fell by two points to -34%, while just over one-in-ten considered it a good time for expansion.

Taxation remains an ongoing concern for many small businesses; taxes ranked second among top problems at seventeen percent. Concerns over government regulations rose slightly but remain less prominent than labor or tax issues.

The monthly Small Business Economic Trends survey has been conducted by NFIB since the late twentieth century using random samples drawn from its membership base.