Small Business Outlook: Confidence in Economy Drifts Up

Small businesses seem to be in a valley facing headwinds of high inflation. More qualified applicants for positions would put them on an upward trajectory, but a tight labor market is making that difficult. Negative views on the local and national economy have lessened for small business owners according to the MetLife & U.S. Chamber of Commerce Small Business Index, and a brighter outlook on economic conditions bodes well for small business confidence ahead of the presidential election later in the year that typically puts a “pause” on any major changes in economic sentiment.

Listen: Tom Sullivan and National Federation of Independent Business (NFIB)'s Holly Wade talk about their small business forecasts on a weekly podcast. Listen here.

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Just Released! The Q1 2024 MetLife & U.S. Chamber Small Business Index was released on April 2.

New Small Business Data

Intuit QuickBooks Small Business Index April 2024(April 2, 2024)

Summary: Optimism for hiring may still be high, but actual hiring by small employers remains in negative territory. 

• While job growth has remained in the negative since last September, small business employment declines have improved a little bit since March and show -0.10%.
• Information sector had steepest decline since March and manufacturing was a close second.  
• Wholesale trade showed the steepest increase and education and health services was a close second for positive employment data.
• New England states experienced small business employment growth and the West Coast experienced employment declines.

National Federation of Independent Business (NFIB) Small Business Optimism Index (April 9, 2024)

Summary: Optimism Index hits an 11-year low as inflation continues to be strongest headwind. 

• 10% of small business owners reported higher sales in the past 3 months (3 points better than February), and the percentage expecting higher sales dropped 8 points to -18%.
• 25% of small business owners ranked inflation as their top concern, (up 2 points from February), and 18% of small business owners ranked labor quality as their top problem in March.
• 28% of small businesses raised their prices in March (up 7 points), and 33% are planning on raising prices in the next 3 months (up 3 points from February).
• 56% of small business owners reported capital outlays in the last 6 months (up 2 points from February), and 20% are planning capital purchases in the next 3 months (down 1 point from February).
• 8% of small business owners are expecting better credit conditions in the next 3 months (2 points worse than February).
• 36% of business owners are expecting the economy to improve (2 points better than in February).

MetLife & U.S. Chamber of Commerce Small Business Index for Q1 (April 2, 2024)

Summary: Negative feelings about the economy lessen for Main Street, and inflation remains front and center on small business owners’ radar.

• 33% of small business owners are positive about the national economy’s overall health (increased 8 points since last quarter) and 48% are negative about the U.S. economy (5 points less negative than last quarter).
• 38% of small business owners are positive about their local economy (8 points higher since last quarter) and 30% have a negative view of their local economy (2 points less negative than last quarter).
• 52% of small business owners rank inflation at their top concern (9th consecutive quarter at top). 
• 16% of small business owners added staff in the past year (down 1 point from last quarter and down 3 points from a year ago).
• 36% of small businesses plan on increasing investment over the next 12-months (6 points lower than last quarter) and 34% of small businesses plan on adding staff (6 points lower than last quarter).
• The percentage of small businesses anticipating increased revenues remains elevated (67%) albeit 4 points lower than the last 2 quarters’ record highs.
• 65% of small businesses believe the health of their own businesses is good (1 point increase from last quarter) and 67% are comfortable with their current cash flow (no change from last quarter).
• 60% of small business owners are concerned about cyber threats and 48% have trained staff on cybersecurity safety measures.
• 62% of small business owners contribute to a “rainy-day fund” in anticipation of a crisis or threat and 61% feel comfortable about their ability to withstand a disaster. 

Gusto New Business Formation Report (April 2, 2024)

Summary: Some startup trends remain the same (funding through personal savings) and some are different (women outpaced men in 2021 and 2023).

• 49% of 2023’s startups reported they are women-owned (no change since 2020 and 20 points more than 2019).  45% of 2023’s startups reported they are owned by men.
• 70% of women CEOs cited flexibility as the top motivator for launching their business in 2023 and flexibility ranked highest for startups owned by men too (66%).
• 67% used $10,000 or less (mostly in personal savings) to start their businesses in 2023.
• 35% of 2023’s startups hired fully remote employees (13 points higher than 2022).

WSJ / Vistage Small Business CEO Confidence Index (March 27, 2024)

Summary: Confidence on Main Street has not changed much since February as revenues and profit expectations plateau.  Small employers have incrementally upped hiring plans since the start of the year because of steady demand.

• 27% of small business owners say the economy has improved compared to 12 months ago (down 3 points from February) and 27% say that the economy has gotten worse over the past year (1 point worse).
• 26% of small business owners believe the economy will improve in the next 12 months (up 2 points from February and up 10 points from a year ago) and 22% believe the economy will worsen (no change).
• 51% of small businesses report that consumer demand is growing and 11% report a slowdown.
• 54% of small businesses plan on increasing employees in the next 12 months (up 3 points from February). 
• 34% of small businesses expect to increase fixed investments in the next 12 months (up 2 points ).
• 62% of small businesses expect increased revenues in the next 12 months (1 point less than February). 
• 48% believe profitability will improve (down 3 points from February) and 17% of small business owners believe profitability will decrease (1 point worse than February).
• 12% have openings for unskilled labor (down 3 points from January).

About the authors

Thomas M. Sullivan

Thomas M. Sullivan is vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.

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