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The Q1 2021 MetLife and U.S. Chamber of Commerce Small Business Index (SBI), released this week, found that the availability of coronavirus vaccines is lifting spirits among America’s small business owners. And while many see a long haul ahead before things return to normal, there are signs small businesses see a better future on the horizon.
Here are five interesting findings from the new report that go beyond the headlines.
1. Outlook is turning more positive, but remains below pre-pandemic levels.
This quarter, the SBI score is 55.9, a slight increase from 52.9 in Q4 2020. However, the new score remains substantially below findings before the pandemic began: the Index score was 71.7 in Q1 of 2020.
Still, the SBI is up in comparison to the middle of last year, during the peak of the pandemic: the SBI reached an all-time low of 39.5 in Q2 2020. In other words, the SBI has been steadily increasing over the past few quarters, but still has a ways to go to get back to levels seen before the pandemic.
In a positive sign, small businesses’ sentiments about their cash flow are almost back to pre-pandemic norms. This quarter, comfort with cash flow sits at 62% overall, statistically similar to last quarter’s 59%. What’s more, cash flow comfort is close across all small business sectors (60-65%) and all sectors are near or above their pre-pandemic readings in Q1 2020 (cash flow comfort was 65% total then).
In another potential positive sign, more small businesses are expecting to hire in the coming year. 32% of small businesses plan to increase hiring over the next year, up five points this quarter (27% planned to increase staff in Q4 2020). Many anticipate keeping staff levels steady: almost half (49%) of small businesses plan on retaining their current staff size over the next year.
2. Views of the economy decline.
Whether it’s their local economy or the national economy, small businesses see a business climate that’s still on the mend and needing more help.
A majority (59%) rate the overall health of the U.S. economy as poor, bringing views down to those seen last summer (58% saw the economy as poor in August). In the Q4 2020 survey, 50% saw the national economy as poor. For comparison, before the pandemic (in Q1 2020) only 12% of small businesses said the national economy was poor, representing a 47-point increase from then compared to this quarter.
That same downbeat assessment includes their local economies: 43% of small businesses rate their local economy’s overall health as poor, up from 32% in Q4 2020.
3. Most see months to a year before things return to normal.
Despite the growing availability of vaccines most small business owners do not anticipate the economy returning to normal anytime soon, a view that’s held over the last eight months. Six out of ten (59%) small businesses predict it will take six months to a year to get back to normal – the highest percentage measured thus far and up 13 percentage points from 46% when the survey started asking this question in March of 2020, before the full impact of the pandemic became apparent.
Still, more small businesses envision operating indefinitely in the new business climate. 45% of small businesses surveyed say they can operate indefinitely without shutting down in the current environment. This is up five points from last quarter, 17 points from July 2020, and 22 points from late April 2020 when only 23% said they could operate indefinitely.
That means almost twice the number of small businesses see a longer timeline for their survival than at the start of the pandemic. It’s also possible that the coronavirus stimulus package passed in December played a role in bolstering confidence: 39% of small business owners say the stimulus checks made them more confident about their ability to operate.
4. Minority-owned businesses are more concerned about the impact of the pandemic.
According to the Centers for Disease Control there is increasing evidence that some racial and ethnic minority groups are being disproportionately affected by COVID-19. According to the Mayo Clinic, factors driving these disparities include a higher proportion of the population having underlying health conditions and where people live and work.
Not surprisingly, minority-owned businesses said they have greater concerns about the pandemic’s impact on their businesses’ finances and future prospects compared to other groups. 86% of minority-owned small businesses are concerned about the impact of the pandemic on their business’s future (versus 72% of nonminority-owned small businesses who are concerned).
They are also more likely to be concerned about employee mental health and report actively providing employees with resources to help them cope. Minority-owned small businesses are more likely to be concerned about employee mental health (67% for non-minority-owned and 82% for minority-owned). Minority-owned small businesses (88%) are more likely than non-minority-owned small businesses (68%) to provide employees with some sort of mental health and wellbeing resources.
5. Vaccines boost small businesses optimism.
Most small businesses say the widening availability of vaccines is giving them hope about the future of their business and that they’re likely to require their employees get vaccinated.
A majority (54%) of small businesses say the availability of vaccines has made them feel more optimistic about their own business’s future.
Small business owners also want the vaccine themselves. Overall, 70% of small business owners say they are likely to get the COVID-19 vaccine as soon as it is made available to them. Just 28% say they are unlikely to do so.
Businesses of all sizes have been stepping up to help our economic recovery. Hundreds of companies have joined the U.S. Chamber’s Rally for Recovery Commitment, which ask employers to commit to taking three important steps—including reducing barriers to employee vaccinations—to get the country back to health.
For more findings from this quarter, please visit https://www.uschamber.com/sbindex/.