Small Business Owners More Optimistic

By Greg Niemi . April 24, 2013

Small business owners’ optimism lagged the wave of optimism shown earlier by leaders of most large and mid-sized businesses.  There are several reasons for this more recent optimism by small business owners.   

One of the first places to look is at our neighborhood restaurants – they are jam packed.  Now, restaurants (or taverns) can also be counter cyclical to economic markets.  However, there is no denying the restaurants are even all the more packed at the same time our economic markets are strong.  Spending in fast food restaurants is also at record rates.  Plus retail sales, as a whole, have been up which is an indisputable fact that consumers are spending. Consumer Confidence

Another positive sign is the hiring we are seeing in the service sector.  Small businesses make up the biggest share of the service sector and the service sector is creating jobs and hiring at near pre-recession levels.   

Large businesses, including the manufacturing sector, has fueled most of their recovery through efficiency – by producing more with less – which pleases shareholders but doesn’t necessarily translate to job growth.  Whereas, the service sector, which is commonly more labor intensive, is the ones who are hiring.  We have seen job growth recently in new construction especially residential home building and remodeling. 

Another indicator is the jobless rate has continued to decline however, at the same time, the rate of hiring overall is also showing signs of slowing.  We should be cautious with this indicator because unemployment is typically a lagging indicator.  Plus the rate of unemployment is also affected by the number of people who are just dropping out of the job search (and are no longer counted as unemployed). 

People in general are feeling a little bit better.  Their 401Ks are up.  During the economic recession many became more conservative by spending less and saving more.  Many paid down debt plus many have refinanced at historically low interest rates.  And now, to boot, home values on existing homes have been on the rise which is a feel good for all those who own homes. 

Quite simply more people have more money in their pocket and they feel good about this.  This is what leads to a rise in optimism by small business owners.  Small business owners are more frequently the closest to the front line of serving consumers who are spending more. 

Leading indicators show that we can expect our economic growth to continue throughout the first half of this year.  We then expect slowing in the second half of 2013.  Projections by economic experts for this slowdown have been sliding out a month at a time yet all seem to predict before the end of 2013.  

One concern and caution I have is this more recent optimism by small business owners is coming a little late.  We may have missed the best part of the wave.  Most of the gains in the financial markets have been already realized so it is unrealistic to expect this wave to continue on the same trajectory.  

I work with small to medium businessed across North America.  I am pleased to have seen a renewed optimism.  Especially here in the upper Midwest.  It feels good.  Real good.  Our optimism and our confidence have a huge impact on our businesses outcomes.

Greg Niemi

 

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