I was talking to one of my neighbors this week and she asked me about the looming recession and when the stock market was going to crash. I paused for a moment, and then remembered that she is a disciple of fake news, brought to her daily by her favorite alphabet news station. You have two choices of response here.
Tell them what is really going on or walk away in peace. That, my friends, is up to you. However, small business is not buying into the recession hype just yet. As a matter of fact, they’re continuing to invest, grow and hire.
The National Federation of Independent Business (NFIB) group’s most recent small business optimism index remains extremely strong, coming in among the top 15% of its historical levels. “Small business owners continue to invest, grow and hire at historically high levels, and we see no indication of a coming recession,” NFIB’s president and CEO, Juanita D Duggan, said in a press release. But how can that be?
MSNBC says that Trump caused Hurricane Dorian and the economy will implode. Just listen to NFIB’s chief economist, William Dunkelberg. “Expectations can be infected and, as a result, could turn sour. All the talk about an impending recession can create a false reality, but it doesn’t make it right. Main Street is continuing to produce and remains strong in spite of the headlines.” His words, not mine.
If you drill down into the NFIB numbers, businesses posted strong improvements, with 59% of owners reporting capital outlay and another 28% planning capital outlays in the next few months. Profit trends improved to the survey’s third-highest reading in its history. We understand that the NFIB is an apologist for small business, but their optimism is backed by others. MetLife and the US Chamber of Commerce small business index was released this week finding that their measure of small business confidence came in at an all-time high. About 56% of the small businesses surveyed said that their local economy is in good health, with 58% and 66% saying that both the economy and their own businesses were in good health, respectively.
MetLife Small Business Index
While optimism is high, there are still areas of concern for entrepreneurs. With unemployment at and near all-time lows, their cost of compensation has risen over the past quarter. This apparently has not deterred human capital growth. In fact, more than 40% of the small business owners surveyed by human resources provider Oasis, a company owned by the payroll giant Paychex, planned to hire in the coming year, despite the current tight labor market.
Concerns regarding changes in fiscal policy also are present as we approach the 2020 election. Small businesses have saluted the changes in taxation and regulation made by the Trump administration, and are uncertain if these mandates will remain. Uncertainty is the worst thing for business and the markets, as it handcuffs you on your ability to move forward and grow. Albeit not what you want, but even just knowing that the economy may be sliding backward is better than knowing nothing at all, as you can begin to plan for these deleterious economic situations. For now it is all speed ahead.