Small business confidence was all the rage in 2017. Take the index of small-business optimism from the National Federation of Independent Businesses, which finished the year at 104.9 in December. According to Marketwatch “the closely watched index of sentiment among small-business owners soared after the 2016 presidential election, pushing 2017 average monthly readings to the highest levels in the four-decade history of the index.” But despite the highs in confidence, there was little else that broke records.
“I’ve never seen anything like 2017,” said NFIB chief economist Bill Dunkelberg. “The 2016 election was like a dam breaking. Small-business owners were waiting for [more accommodating] policies from Washington, suddenly they got them, and the engine of the economy roared back to life.” While I appreciate Dunkelberg’s excitement (I was apart of the excitement, if you check my previous writings and podcasts), the truth is the “policies from Washington” that helped generate a roaring economy, never came to fruition in 2017, at least not for small businesses.
According to the NFIB ” Over the course of 2017, according to the ADP private-sector employment report, small businesses — those with between one and 49 employees — charted the smallest percentage increases in employment of any of the three broad categories of business size (the other two categories comprise companies with 50 to 499 employees and those with 500 or more). In an earlier, separate monthly report focused on jobs, NFIB noted that 54% of small-business owners in December reported finding few or no qualified workers, an all-time record, while the share of business planning to raise compensation jumped six percentage points to 23%, the second highest reading in history.” This means that, due to the lack of qualified employees, small businesses had to compensate by paying workers more that they could find. Things may change in 2018, but with such a low employment number, most experts are signaling an even slower job market due to current employment numbers being so high. Confidence should remain strong in my opinion, but at some point, Trump policies (and not simply cutting Obama regulation) do have to come and positively impact small business growth.