The NFIB small business optimism index is virtually unchanged for the third month in a row at 90.6 in November after 90.7 in October and 90.8 in September. This index is slightly below the consensus of 90.9 in the Econoday survey of forecasters. The index remains below the 49-year average of 98 for the 23rd straight month. Month-to-month changes in the index components were small and show little change in underlying momentum.

If the index reflects small business sentiment as stalled at a soft level in recent months, the uncertainty index points to perceptions of a less risky outlook at 65 in November after 76 in October. To some extent this is due to less worry about the persistence of inflationary pressures. At present, it looks like small businesses are more concerned about finding qualified workers. In November, 24 percent of survey respondents said that the quality of labor was their most important concern, while 22 percent said that inflation was their biggest worry.

The November index shows increases in five components, decreases in four, and one unchanged. No one movement stood out from the others. It is interesting that satisfaction with current inventory improved 3 points to 0 percent, a neutral reading that suggests businesses are not feeling either a need to stock up or reduce stocks. On the other hand, plans to increase inventory are down 3 points to minus 3 percent, consistent with a cautious outlook for business conditions going forward.

With nearly 50 years of data, the small business optimism index has been below the historical average of 98 for 22 months in a row. November's consensus is 90.9 versus 90.7 in October.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market - especially small caps.