The latest NFIB Small Business Optimism survey shows rising confidence in the future.
But underneath the hood there are some interesting stories happening.
One we want to highlight — because it’s so important to the market and the Fed — is what survey respondents are saying about wages.
The first chart shows that planned compensation increases (the thin lined) have hit their highest level since the crisis. We’re much closer to all-time highs on this level than lows.
The next chart asks respondents what their #1 problem is right now.
This is good chart, because it shows how the pressures facing businesses ebb and wane over time.
There are two things to notice. One is that the number of businesses that say “sales” is their biggest problem has come down dramatically. The other thing, which we highlight in the red circle is that the number of businesses citing “labour quality” as being a problem is on the rise. In other words, businesses are having a harder and harder time finding workers., which tells you something about the state of the labour market.
Bottom line: Plans to increase compensation is rising and quality labour is getting harder to come buy.
So far, official measures of wage inflation have been fairly time (though up over the last year). Evidence is mounting that another leg up is coming.