(This column originally appeared in The Guardian)
Unemployment is at historic lows. Inflation is receding. The stock market is approaching its all-time high. Gross domestic product is healthy. Household savings are near peak levels. There are more travelers passing through our airports than in 2019. Retail sales continue to grow. The restaurant industryis booming. Corporate profits remain strong. Wages are outpacing inflation.
It seems like the economy’s doing pretty darn good, right? And yet according to the most recent monthly data from the National Federation of Independent Businesses … optimism among small business owners is at a 10-year low.
Why? If there’s one thing I’ve learned from running a business for over 20 years, it’s that it’s never one thing.
There are 33m small businesses in the US, with about 6m of them employer-owned. Each of these people has their own reasons for feeling less confident about the economy. But this is what I’m hearing the most from my clients:
‘I’m still struggling with higher costs’
Inflation has been receding but most of my clients are still trying to absorb double-digit increases in their core costs — construction materials, industrial chemicals, food, labor, machinery parts — that have occurred since the end of the pandemic. Thanks to the Federal Reserve’s move to tame inflation, the national prime interest rate is about 8.5% which means that most smaller companies, who are not considered “prime” customers, are paying anywhere from 9–12% for new loans, assuming they can get them. Not all of these higher costs can be passed down to customers and many small business owners have cut overhead to the bone. So margins and profits are squeezed.
‘It’s an anti-business climate’
Few can argue that the Biden administration is pro-worker. Taking a cue from Washington, blue states are increasing minimum wages and racking upemployee-friendly requirements. Meanwhile, new regulations from pay transparency to worker classification rules are being drawn up, approved and implemented and emboldened workers are refusing to return to the office and demanding higher wages and more benefits.
‘There’s a recession coming’
We’ve been hearing that story for months and yet we’re still not seeing it. But that hasn’t stopped some of my clients from blaming even the slightest drop-off in orders on an economic downturn, rather than their own unsuccessful sales efforts or customer service stumbles. In the US, which has the world’s largest economy, there’s always a recession somewhere. This year businesses in the technology, commercial real estate and manufacturing industries are struggling. Yet, retail, residential construction, and services are booming. My smarter clients who have run businesses for a while recognize the cycles of the economy. Others fear a downturn, no matter how small. Uncertainty is at the very core of running a business. But hen are things ever certain?
‘I don’t like Biden’
No matter how great things are, people aren’t going to give the current president credit if they don’t support his party. Democrats didn’t recognize former president Donald Trump’s economic accomplishments either. However, most small business owners tend to lean to the right with a majority even supporting Trump in 2020. So when asked about their confidence human nature takes over. Why not take a jab at that guy in the White House?
‘The world is going to hell’
People today fear the war in Ukraine, tensions with China, climate change, AI, the next Covid and the moral decay of the nation’s youth. Business owners in 1970 feared nuclear war, cancer, computers, pollution and the moral decay of the nation’s youth. Shopkeepers in ancient Pompeii feared earthquakes, disease, war, corruption and, yes, the moral decay of their youth. The world is always going to hell, and when you live long enough you learn to accept that people will always deathly afraid of something. Unfortunately, some business owners still say those fears inhibit them from feeling confident.
So why are so many small business owners not feeling confident, despite a good economy? There’s no one answer. With all due respect to the NFIB and the countless other organizations — and just like all those dubious studiesthat try to measure happiness — measuring consumer and business “optimism” is a tricky and flawed business in itself. Maybe that’s the real answer.