Key Findings

Small Business Environment

Small Businesses’ Views on the National Economy Rebound

U.S. Economic Outlook by IndustryChart detailing the positive economic outlook across various industries

This quarter, small business optimism about the local economy increased five percentage points, with 56% of small businesses saying their local economy is in good health.

Many other national indicators remained steady and near all time highs. Views of the national economy held with 58% of small businesses saying the U.S. economy is in good health (compared to 59% in Q2). This represents a steady upward trend since 2017 (33%).

By sector, small retailers are more likely to view the national and local economies more negatively. While manufacturers are most likely (63%) to label the national economy as good, retailers the least (53%). As for the local economy, professional services and services are both the most optimistic (at 59%), while retailers are least likely to say their local economy is good (49%).

Other key findings about the small business environment include:

Small Business Expectations

Investment, Staffing Plans Stay Steady

Small Business Variance in Investment PlansGraphic indicating small business variance in investment plans

Overall, small business expectations remain unchanged from the past two quarters. Almost a third (29%) of small businesses plan to increase staff in the next year (28% in Q2). 6% expect to downsize (5% in Q2).

Across sectors, the manufacturing industry saw a significant bump in the number of small businesses reporting plans to increase staffing levels (39%) last quarter. This quarter, small manufacturers’ expectations on staffing have softened (32%), while retail continue to be the least likely to have plans to increase staff (23%).

Demographically, hiring trends show some interesting patterns:

Most small businesses plan to keep investment steady. Expectations to increase investment are statistically unchanged from last quarter at 26% (compared to 27% in Q2). Similar to expectations toward increasing staff, female and minority-owned small businesses have higher expectations toward increasing investments, when compared to their respective counterparts.

Services (32%) is the most likely sector to have plans to increase investments, manufacturing is the least (23%). Revenue expectations (55%) have softened slightly since Q2 (57%), with Western small businesses the most optimistic that they will see growth in future revenue (59%), while Midwest small businesses (48%) are the least optimistic.

Across industry groups, last quarter’s renewed optimism among manufacturers has abated, with just 49% (versus last quarter’s 59%) who say they expect revenue to increase—the lowest among the four. Retailers are also less optimistic this quarter (52%) than last quarter (55%) in a revenue increase. 61% in professional services report expectations of increased revenue.

Small Business Operations

Second Decade Small Businesses are Most Optimistic about Business HealthGraphic indicating the optimism of small businesses

66% of small businesses report good health, statistically unchanged from last quarter (65%).

Across sectors, professional services (74%) remain the most optimistic about business health by far. While those in retail remain the least optimistic, their outlook has improved slightly to 59% from 55% last quarter. Manufacturing (65%) and services (69%) small businesses fall in between on views of their own business health.

Generally, the larger the small business the more likely it is to report being in good health. Larger businesses are far more likely than smaller ones to report good health (61% among smaller businesses, 72% among mid-size, and 81% among larger small businesses).

This quarter, 24% of small businesses in the service sector have reported increasing staff. Retailers (18%), manufacturers (17%), and professional services (15%) report less of a need to increase staff.

Comfort with cash flow has reverted to the average of 81% for all small businesses. Similar to business health, this number has remained consistently positive from quarter to quarter. Across regions, small businesses in the West are the most likely to report comfort in cash flow (83%), while those in the Northeast are somewhat less likely to report a comfortable cash flow (78%).