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Small business optimism has recently decreased 3.7 percentage points from fourth quarter 2018 to first quarter 2019. — Getty/gustavofrazao

Retired general Colin Powell once said that perpetual optimism is a force multiplier. Problem is, it’s hard to think positive thoughts all the time—especially when you’re running a small business faced with myriad challenges.

Case in point: Overall, small business optimism recently dipped 3.7 percentage points—from 69.3 in fourth quarter 2018 to 65.6 in first quarter 2019, per the MetLife & U.S. Chamber of Commerce Small Business Index, which is based on a survey of small business owners. Also, the Index revealed that small business owners’ optimism about the U.S. economy dropped from 58% to 53% over the same period; and perceptions of their local economy decreased from 56% to 53% since last quarter.

Uncertainty impacts outlook

What’s behind the slippage in sunniness? Despite polled small business owners believing that their fundamental business operations remain strong, economic, political and even climate-related events have weighed on their minds over the past three months.

“The uncertainty over the recent government shutdown had ripple effects throughout the economy that impacted the start of the new year and hurt the stock market, which has caused businesses to give pause,” Paige Arnof-Fenn, founder and CEO of Mavens & Moguls, a Boston-based global branding and marketing firm, told CO—. “The looming Mueller report adds more uncertainty—and Wall Street prefers things to be stable and run smoothly. Business owners naturally are waiting to see what happens before making any big decisions or capital investment in case liquidity becomes an issue,” she added.

Steven Rothberg, president and founder of Minneapolis-based job search site College Recruiter, agreed that the longest-ever shutdown of the federal government took its toll—and reduced confidence in our elected officials to compromise and solve problems. But tariffs and trade wars have contributed to eroded optimism, too, he told CO—. “More than anything else, business owners crave certainty, and it’s very difficult to plan, and therefore feel positive about the future, if the future is so uncertain.”

Ask Sam Cross, owner of Broad Street Home Care, a Chicago-based senior care services provider, and he’ll tell you that the Dow has folks jittery as well.

“The sharp drop in the stock market last quarter caused concerns over whether or not there are any systemic issues. The financial crisis of 2008 is still fresh in people’s minds. This is heightened with small business owners, who may be particularly sensitive to any market volatility or even collateral damage in an uncertain economy,” said Cross.

More than anything else, business owners crave certainty, and it’s very difficult to plan, and therefore feel positive about, the future.

Steven Rothberg, president and founder, College Recruiter

Additionally, a spate of bad weather and its financial consequences has dampened moods for many.

“There have been a lot of devastating storms, snow and rain throughout the country this winter, which has wreaked havoc in the areas where they hit,” Arnof-Fenn said.

Local concerns weigh heavy

Concerns about matters closer to home are also top of mind for some, as evidenced by notable drops in “local economic outlook” scores among key business sectors and regions. Since quarter four 2018, this score dropped from 62% to 53% and from 59% to 50% in the manufacturing and service sectors, respectively, and from 48% to 38% and from 67% to 60% in the Northeast and West regions, respectively.

“I’m not generally optimistic about my local economy,” said Cross. “The Illinois economy is saddled with debt, and our real estate taxes are already very high. The result is that people are moving out, with those remaining being pressured by higher taxes.”

Rothberg, on the other hand, has a positive vibe about his market.

“Minnesota has a diversified economy, educated workforce, high labor participation rate, high voter participation rate, and good governance,” said Rothberg.

For small business owners to feel better in 2019 and beyond, various conditions need to improve.

“In addition to the stock market rising, I think Washington needs to find ways to work across the aisle and start passing legislation for infrastructure work to create good middle-class jobs across the country,” said Arnof-Fenn, who added that, despite other reservations, she remains upbeat about American ingenuity and competitiveness on the world stage.

Rothberg echoes her sentiment.

“We need to see more stability in how we’re governed, including tax laws, immigration and trade,” he said.

All three agreed that small business optimism is an important economic barometer that should be closely monitored.

“Small business owners are the driving force in the progress of our nation. How we feel about the economy, both local and national, can create either a vicious or virtuous cycle,” said Cross. “It impacts our willingness to take risks, and it is only through the willingness to take risks that we can grow.”

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