Small business owners reported the highest levels of confidence in the U.S. economy since the onset of the COVID pandemic in 2020, according to the third quarter Small Business Index.
Maintained by the U.S. Chamber of Commerce, the Small Business Index tracks changes in sentiments among entrepreneurs and small business owners. Although inflation and interest rate concerns continue to weaken financial outlooks, 33% of those polled by the chamber in Q3 believed the national economy was healthy, while 38% held similar views about their local economy. These represent 9% and 8% increases respectively from the previous quarter.
Small business owners also believe the economy will stay on its current trajectory well into the future. The percentage of entrepreneurs who forecast higher earnings in the next year reached an all-time high of 71%. Survey participants plan on using this extra cash to expand their companies through investments and additional employees.
Despite the increase in confidence, several problems persisted into the third quarter and continued to keep economic optimism in check. In addition to inflation and interest rates, staff retention was cited by many as a challenge. According to the index, 56% of respondents struggled to meet employee wage expectations, while others encountered similar difficulties in providing benefits. As a solution, some small business owners have sought to improve their work culture and provide a better experience for their teams.
However, if the economy continues to perform as expected, many of these issues could be resolved on their own in the coming year. Inflation, shortages and supply chain disruptions caused by the COVID pandemic have translated into higher costs of living for a majority of workers, leading many to seek higher paychecks. If business earnings improve as predicted and the Federal Reserve’s disinflationary measures have their intended effect, companies may be able to better provide for their employees, resolving the persistent labor shortage that has contributed to stress and pessimism among small business owners.