Index Drops As View of Economy Declines
This quarter, the Q4 2023 MetLife & U.S. Chamber of Commerce Small Business Index falls to 61.3—close to sentiments from earlier this year and in late 2022—and below last quarter's score of 69.2. Small businesses' declining view of the national economy and their local economy helped drive the headline score down.
According to the poll taken between October 5-24, 2023, 25% of small businesses say the U.S. economy is in good health and 30% say their local economy is in good health, both down eight percentage points since last quarter. While optimism about future revenue expectations is widespread, there has been a softening of this measure too. Almost two-thirds (65%) of small businesses expect revenue to increase next year, down from a record-high 71% expecting the same over the last two quarters.
Small businesses' concerns are still dominated by persistent high inflation. For the sixth consecutive quarter, at least 53% of small businesses cite inflation as one of the biggest challenges they are facing right now. However, concerns may be leveling off; the percentage citing inflation as the top concern has held steady at 52-54% since Q4 2022.
Small businesses' second biggest concern is revenue with 22% citing this as a top concern. Meanwhile, small businesses' concerns about supply chain issues are slightly fading. Supply chain issues are tied for fourth place as the most challenging issue reported among small businesses this quarter (17%), along with affording employee benefits or healthcare.
Nearly half of small businesses report searching for, recruiting, or interviewing new talent in 2023—a significant increase from mid-2021. Most of those looking for new employees say it is hard finding candidates with the experience or skills they need. More also say it is hard to find enough candidates to fill open positions versus a few years ago. Nearly half of those who report searching for new talent in 2023 say it is hard to offer competitive pay and benefits. In fact, 60% of all small businesses agree it is challenging to keep up with existing employees' salary expectations.
In response, small business owners are getting innovative in their struggle to find and retain talent. The most popular strategy is offering flexible work schedules, with 68% of small businesses saying they plan to offer it in the next year. Roughly half (48%) also say they plan to offer a hybrid or remote work environment in the next year to attract new talent. Both incentives are particularly popular among those in the professional services sector. In addition, half (50%) of small businesses say they will be offering increased pay, paid sick leave, or listing the hourly pay/salary range for each open position they announce.
To help alleviate staffing constraints, small businesses are interested in recruiting workers from overlooked groups. Nearly three in four (71%) small businesses agree that employers should more often consider hiring from overlooked talent pools such as formerly-incarcerated people, veterans, military spouses, or legal immigrants. In addition, a majority (54%) of small businesses think the U.S. should issue more skilled worker visas annually so businesses can hire the workers they need.
Small Business Index Score 2020 Q1 - 2023 Q4
The MetLife and U.S. Chamber of Commerce Small Business Index score for Q4 is 61.3. The Q3 Index score was 69.2.