There’s been a lot of talk of recession lately but small businesses, for the most part, don’t seem to be listening.
That’s the conclusion from the National Federation of Independent Business (NFIB). The business group’s most recent small business optimism index, released Tuesday, fell slightly. But don’t let that fool you. The index – which has been measured quarterly since 1973 and monthly since 1986 – remains extremely strong, coming in among the top 15% of its historical levels.
“Small business owners continue to invest, grow and hire at historically high levels, and we see no indication of a coming recession,” NFIB’s president and CEO, Juanita D Duggan, said in a press release.
According to the report, capital spending by small businesses posted strong improvements, with 59% of owners reporting capital outlay and another 28% planning capital outlays in the next few months. Profit trends improved to the survey’s third-highest reading in its history.
“The pessimism we’re seeing is contagious, even though the actual economy is thriving,” said NFIB’s chief economist, William Dunkelberg. “Expectations can be infected and, as a result, could turn sour. All the talk about an impending recession can create a false reality, but it doesn’t make it right. Main Street is continuing to produce and remains strong in spite of the headlines.”
But that’s not all. Also Tuesday the MetLife and US Chamber of Commerce small business index was released and the index – which was first published in 2017 and measures small business confidence – came in at an all-time high. About 56% of the small businesses surveyed said that their local economy is in good health (up five percentage points from the last survey) with 58% and 66% saying that both the economy and their own businesses were in “good health”, respectively.
Challenges, of course, are many. Compensation costs continue to rise. Trade tensions and immigration confusion are creating uncertainty. Next year’s elections could have an impact on taxes, labor laws and capital investments. But right now just finding good people in this low-unemployment economy remains the biggest obstacle facing small business owners.
But these challenges don’t seem to be impacting their hiring plans. In fact, more than 40% of the small business owners surveyed by human resources provider Oasis, a company owned by the payroll giant Paychex, planned to hire in the coming year, despite the current tight labor market, and more than three in 10 small business owners planned to increase their headcount next year, despite the administration’s immigration policy changes, according to a quarterly poll of 2,300 small business owners recently released by CNBC. “The percentage of small business owners who expect any effect on their businesses – positive or negative – as a result of changes to immigration policy has barely budged in the past two years,” the report said. “Even when concerns about immigration spiked, about six in 10 small business owners said they didn’t expect immigration policy to impact their businesses, the same as in previous quarters.”
Of course there will be a downturn someday. Of course we should be paying close attention to the economy. But the smartest business leaders I know understand that economic data – which can shift up or down in any given month – must be considered in its historical context. For now, small businesses seem to be doing just fine. It’s not the economy that causing us headaches, it’s finding good people do all the work we currently have lined up.
