This Week's Small Business Weekly Forecast
Mostly sunny - Are small businesses above the clouds?
What it means: Small business owners continue to be positive about their own operations, but they know high inflation, rising energy costs, worker shortages, and high interest rates are factors that may really hurt revenues. All those factors are the clouds that remain in the picture. So, this week’s forecast has small businesses above the clouds where it is partly sunny, but unfortunately the higher altitude can make it more difficult to breathe.
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.
Watch: Catch Tom Sullivan on ASBN (America's Small Business Network) every month providing the latest small business policy updates, news, and analysis. Watch here.
Coming Soon: The next MetLife & U.S. Chamber Small Business Index release is mid-December, 2023.
New Small Business Data
National Federation of Independent Business (NFIB) October Jobs Report(November 2, 2023)
Summary: Still tough to find and hire good employees. Tight job market is largely unchanged last month.
43% of small businesses reported job openings they could not fill in October (unchanged from September, which was up 3 points from August and far above the 49-year average of 23%).
61% of small businesses hired or tried to hire in October (unchanged from September). Of those hiring, 90% of owners reported few or no qualified job applicants (down 3 points from September).
17% of small business owners are planning to create new jobs in the next 3-months (down 1 point from September).
36% of businesses raised compensation in September (no change for 4 months) and 24% of small business owners plan on raising compensation in the next 3-months (up 1 point from September).
37% of small businesses have openings for skilled workers and 18% have openings for unskilled labor.
Summary: No surprise that small businesses are first movers when it comes to AI because AI tools free up time for founders and their teams.
75% of small businesses utilize AI in their operations, with financial management tools used the most (40%), email marketing automation ranking 2nd (32%).
The top 5 AI providers used by small businesses are Google (51%), Microsoft (39%), ChatGPT (37%), Adobe (30%), and QuickBooks/Intuit (29%).
Small businesses average $1,800 annual investment in AI-powered tools.
83% of small business owners expect to invest in AI for their business operations over the next year, with 31% expecting significant investment.
82% of small business owners find AI tools effective in running and growing their businesses.
93% of small business owners believe that AI tools are cost-effective and improve profitability.
76% of small business owners describe the use of AI tools as time-savers, freeing up an average of 13 hours a week.
85% of small business owners believe government must balance regulation and innovation when it comes to trying to address risks posed by AI.
WSJ / Vistage Small Business October CEO Confidence Index(October 26, 2023)
Summary: Plans to increase capital investment and employees remain elevated, but confidence in the economy and revenue outlook took a nosedive.
Small business confidence fell back down to June’s level after a 3-month elevation.
49% of small business owners believe economic conditions in the U.S. have worsened compared to a year ago (6 points worse than September) and 13% believe conditions have improved (5 points worse than September). 38% believe economic conditions are the same (1 point increase).
49% of small business owners believe the economy will worsen over the next 12-months (9 points worse than September) and 12% believe the economy will improve (1 point worse than September). 37% believe the economy will stay the same (7 points less than September).
55% of small businesses expect revenues to increase over the next year (4 points less than September) and 13% believe revenues will decrease (no change from September).
40% of small business owners expect higher profits in the coming year (4 points less than September).
34% of small businesses believe they will increase capital investments in the year ahead (1 point less than September) and 48% believe they will increase staff (3 points less than September).
24% of small business owners report that hiring is getting easier (9 points worse than September), with 12% reporting that hiring is harder (3 points better than September). 64% of small business owners report no change in hiring difficulty (12 points higher than September).
53% of small business owners report that higher interest rates are impacting their business (1 point increase from September).
60% of small business owners believe the United States is approaching a recession or is already in a recession (8 point increase from September).
45%of small businesses report they have applied for the Employee Retention Tax Credit (ERTC) and 50% have not and do not plan to. 5% report they plan on applying for the ERTC.
MetLife & U.S. Chamber of Commerce Small Business Index for Q3 (September 20, 2023)
Summary: An uptick in feelings about the local and national economy bodes well for small business owners.
Index score is 63.1 (up 6.1 points from Q2 of this year). This highest level is mostly attributed to a 9-point increase in small businesses’ comfort with their current cash flow and a 6-point increase in how they rate their overall business health.
While more small businesses are negative about the U.S. economy (43%) than positive (33%), the intensity of negativity is lessening (14 points lower than last quarter).
52% of small business owners rank inflation costs as top concern (down 2 points from last quarter and 7 consecutive quarters as top concern) and when asked about inflationary pressures, small business owners are primarily worried about wage hikes (56%).
42% of small businesses plan on increasing investment over the next 12-months (unchanged from last quarter) and 40% of small businesses plan on adding staff (down 7 points from last quarter’s 5-year-high).
71% of small businesses plan on increased revenues in the next 12-months (unchanged from last quarter’s record-high).
70% of small businesses report that rising interest rates are limiting their ability to raise capital (down 6 points from last quarter).
Twice as many small businesses view employee retention as a top challenge comparted to 2-years ago (15% vs. 7% if Q3 2021).
70% of small business owners are prioritizing the mental health of their employees (up from 60% in Q3 2021).
89% of small business owners believe their family-like atmosphere helps retain employees and 82% believe the direct connection between owners and employees gives small businesses an advantage when it comes to hiring and keeping good employees.
Summary: New business applications remain elevated, especially in Southern states. Applications to start businesses in real estate, manufacturing, and transportation & warehousing are declining.
High propensity (likely to hire employees) applications to start a new business increased by 7% in the first half of 2023 compared to the first half of 2022.
The nearly 871,000 applications in sectors likely to hire employees represent a 36% increase over the pre-pandemic mid-year baseline.
The strongest year-over-year growth in business applications is in healthcare, retail, arts & entertainment, and accommodation & food services.
7 out of the 10 leading states in new business applications since 2019 are in the South.
The 16.6 million new business applications filed since March 2020 total more than the combined total during the 5 years leading up to the pandemic.
If the current trend of new business applications continues, this year will be the second-highest total (2021 set the record with 5.4 million business applications).
By: Tom Sullivan, US Chamber of Commerce
Comments