Small Business Optimism Persists Amid Economic Concerns

Small business owners remained optimistic about their own businesses as their confidence in the economy diminished, according to the latest MetLife and U.S. Chamber of Commerce Small Business Index. About two-thirds (64%) of them said their businesses were in good health, and 67% said they were comfortable with their cash flow.

Despite this rather bullish feeling from business owners, only a quarter (25%) of them rated the U.S. economy as good, and 30% said the same about their local economy, both down eight points from Q3. The Index, which tracks small business sentiment, dropped to 61.3 in Q4 from 69.2 in Q3, reversing the gains made in the previous quarter.

I would say the same general feeling exists in Eagle County; our economic indicators are generally positive, visitation has stabilized after a few years of post-pandemic booms, snowfall is tracking a bit above average, consumer spending remains strong, and labor force participation has returned to historic numbers. We’re doing good, but we don’t necessarily feel good about it. And despite the generally good data, we struggle to articulate why we don’t feel good.

This feeling is shared nationally. 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.

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This is likely due to the fact small businesses face major challenges including inflation and the worker shortage. Inflation remains a top concern for 50% or more of small businesses for the sixth quarter in a row, and 53% of small businesses agree there is a worker shortage in their local area. Over half of the small business owners who searched for talent in 2023 say it is hard to find candidates.

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.

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 to find 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. 60% of all small businesses agree it is challenging to keep up with existing employees' salary expectations.

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.

Inflation and workforce are mirrored locally. These remain our biggest business challenges, showing once again that national trends are a good indicator of the local business environment.