(This post originally appeared on The Guardian)
Is the pandemic over? Not even close. Cases are rising and no one really knows if, when or how the dreaded “second wave” will occur. There are lots of economists, analysts and experts pontificating on the future of the US economy. Don’t believe any of them. No one really knows.
But if you’re a small business owner, you need to know. You need to know when the actual economic recovery will take place and how fast it will happen. You need to know this because you have to make plans for hiring, investments and cash management. You need to know this because there are many people – your employees, customers, partners, suppliers – who are relying on you to figure this out. Which means you have to pay attention to certain numbers and metrics so that you can get a sneak preview of the future.
There are many indicators and you may also have your favorites. But here are seven that I’m watching closely.
Every day the Transportation Security Administration publishes data on the number of travelers passing through the nation’s airports. You can see that the numbers are way below what they were when compared with this time last year. But they’re rising, and when you see these numbers start to catch up, you’ll know that the travel business is back in business – which means business is back in business.
OpenTable, the popular online and mobile app where you can book reservations at restaurants, is not only tracking this data but publishing the results for a few select cities every week. The bad news is that traffic is off about 60% when compared with the same period last year. The good news is that these numbers are finally rising, obviously due to reopenings across the country.
But given the number of cases, will these numbers fall? Restaurant bookings means consumers are spending their money and when consumers get back to spending the economy will get back to growing.
Small business optimism
Since the mid-1980s, every month the National Federation of Independent Businesses publishes its Small Business Optimism Index. Up until the Covid outbreak, this index was hovering at almost historically high levels. Then Covid happened and, not surprisingly, the levels fell off a cliff. But actually not as far down as you might have thought. With all the bad news about small businesses, even in the midst of global pandemic that has involuntarily shut so many, optimism surprisingly remains at about the same level as it was in 2014.
Will it drop even further or go up? Considering that there are 30m small businesses in this country that employ more than half the US workforce, watching this trend will be a pretty good indication just when and how fast a recovery is taking place.
ISM manufacturing and service indexes
The Institute of Supply Management publishes these two reports every month, for both the manufacturing and service industries, and they could not be any more important to a small business owner than right now. The reports are based on surveys the organization conducts of its members, who are primarily executives in the purchasing management field. So who better to tell us their buying plans than the people who are actually doing the buying? These levels fell off, course, but they rebounded a bit last month. Let’s hope that they continue to show increases.
Chemical activity barometer
Since 1948, the American Chemistry Council, an association of chemical manufacturers, has published this index, which is not that dissimilar to the ISM’s report above – except that their survey is made of their members, who happen to provide the key ingredients for just about everything made in the US. The more chemicals purchased, the more stuff is being made. This barometer, like all the rest, took a dive during the pandemic. But it’s just now starting to recover. The big question will be how much and how fast.
National Association of Home Builders/Wells Fargo Housing Market Index
Just think about it: when a new house is built, dozens of small firms are involved. They’re painting, putting up drywall, designing plans, drilling holes, pouring cement and hauling away waste. Which is why so many small business owners make their livelihood from the construction industry. There are plenty of metrics gauging the health of the industry, but this is one I like because we know there’s a housing shortage in this country, and if home building slows down that’s really a bad sign.
The good news is that even with the pandemic, it really hasn’t. Sure, the index plummeted but now it’s recovered to the same strong levels that it was earlier this year.
So those are my seven core metrics. Right now, none of them are great. As they rise, so will the economy. And, like many other small business owners, when I see this happening I will have more confidence to spend and hire. If you’re a small business owner, you should also have your metrics. People are relying on you to know what’s going to happen.