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June 08, 2009

Why Didn't I Pay Attention to the Small Business Optimism Index?

Scott Shane

Small Business Trends

Summary

Recently, I took a look at the quarterly indicators put out by the Office of Advocacy of the U.S. Small Business Administration.   One of th

Recently, I took a look at the quarterly indicators put out by the Office of Advocacy of the U.S. Small Business Administration.   One of these indicators is a Small Business Optimism Index generated by the National Federation of Independent Businesses (NFIB).   


The trend shown by that index predicted our economic problems.  So I’m mad at myself for not looking at it before.


Below is a graph of the index since 1999 (it is set at 1986 = 100).  It shows that, in 2007, before we knew we were in a recession, small business optimism had fallen below its level during the recession of 2001. 


Small business people had a feeling that things were turning bad before the National Bureau of Economic Research (NBER) figured out we were in a recession.   


I think I’ll focus more on the opinions of small business people, and less on the NBER’s economists to tell me where things are going in the future.