Optimistic heading into year-end but problems persist, and Congress must act
How will the election affect Main Street?
While the full effects are not yet known, two new NFIB reports indicate that small businesses had strong momentum heading into November 3rd. Keeping that momentum going – and addressing these companies’ real concerns – is especially important as 2020 comes to a close.
“Small businesses are doing their best to bring America back from the brink,” said Holly Wade, executive director for the NFIB Research Center. “They want to keep moving forward, though they face many and potentially mounting challenges that policymakers must address.”
NFIB’s two latest reports are:
According to NFIB’s Small Business Economic Trends report, small business optimism remained at 104.0 in October, unchanged from September and a historically high reading.
Small businesses also indicated a historically high level of job openings in October, with 55% of owners reported hiring or trying to hire in October. A seasonally adjusted 33 percent of all owners reported job openings they could not fill. Finding qualified employees remains a problem, with 87% of small businesses trying to hire reporting few or no “qualified” applicants for open positions.
While these trends are positive, significant concerns remain for Main Street. The NFIB Uncertainty Index rose by 6 points in October, to 98, likely reflecting continued worries about the coronavirus pandemic, government-mandated restrictions, and the outcome of the election. Owners expecting better business conditions over the next six months declined 5 points to a net 27%.
Despite an uncertain near-term outlook, small businesses are taking steps to drive the economic recovery. A net 23% reported raising compensation and a net 18% plan to do so in the coming months. Fifty-three percent of owners also reported capital outlays in the last six months.
And despite nationwide issues with finding qualified candidates, small businesses also increased employment by an average of 0.1 workers per firm over the past few months, while 11% of owners reported increasing employment by an average of 0.3 workers per firm.
Many small businesses were able to take these steps because of improving economic conditions:
- Earnings trends over the past three months improved 9 points to a net negative 3% reporting higher earnings.
- Earnings trends have improved to pre-crisis levels, up 32 points since June.
- Inventory investment plans for the next three to six months increased 1 point to a net 12%, a record high.
- Real sales expectations in the next three months increased 3 points to a net 11% expecting gains.
Even with these gains, uncertainty remains a major concern for most small businesses. Uncertainty over economic conditions and government policy – including pandemic-related restrictions and tax and regulatory matters – can limit investment, hiring, and wages.
“Small businesses hope for the best but plan for the worst,” added Wade. “It’s essential that policymakers at every level, but especially in D.C., provide a clear and common-sense roadmap for the coming months. Now is no time to leave Main Street in the dark.”