Weather Muddies Small Business Outlook

Major parts of the U.S. were pummeled by weather events this year, with two major storms (hurricanes Helene and Milton) in two weeks sweeping a path over Florida and into the Southeast. A record number of tornado warnings in Florida (at least 126) added to the destructive power of the storms.[1] The damage to the economies of the impacted states was significant and persisted after the storms passed as excessive rainfall drained off.

Overall, NFIB’s Small Business Optimism Index rose 2.3 points to 93.7, matching July’s reading and the highest since February 2022. Storm damage interferes with the collection of survey data for NFIB as well as for the government. This left the Index in that 89-93 range where it has been since March 2022, 31 months of poor readings. The Index is based on 10 questions, only two of which have been strong: hiring plans and unfilled job openings. Unfortunately, owners have not been successful at hiring, leaving these two components relatively high from month to month while the other eight components have faded.

Table 1 examines the responses from owners in Florida, Georgia, North Carolina, and South Carolina, the states most impacted by the two storms. Clearly, owners are pessimistic about near-term business conditions, with 33% expecting them to be worse and 10% expecting better. Thirty-four percent were uncertain, unable to give a directional better or worse response. There is less pessimism about real sales volumes and hiring plans are much stronger (hopefully workers are available), credit conditions are expected to be tighter. There will be a lot of construction work once normal weather conditions are restored.

Obviously, the weather had a major impact on labor markets – in the four impacted states. The U.S. Bureau of Labor Statistics reported job creation of just 12,000 workers in October for the entire 50 states, down from a monthly average of about 200,000 (along with downward revisions to August and September of 112,000). There was a major strike (Boeing), but the reduction in employment signals economic weakness, not storm and strike damage. More firms reported workforce reductions than increases and With GDP growth powered by government spending and debt, further growth will depend on the policies of the newly elected government.