For small business owners, it is crucial to stay informed on the latest economic trends impacting their industries. Unfortunately, it can be challenging to digest the information when things like inflation, taxes and the stock market change daily. In this Small Business Update, host Jim Fitzpatrick is joined by Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, to discuss the latest data on how entrepreneurs are navigating the post-pandemic landscape.
While it may seem that the economy is more unstable than ever, the latest data indicates that American companies are starting to feel a sense of normalcy return. The U.S. Chamber of Commerce conducts a monthly survey polling millions of small businesses across the country to identify the anxieties and trends affecting them most. “We actually had one of the highest readings ever,” Sullivan remarks. “71% [of small business owners] say that they’re expecting increased revenues in this upcoming year, which is real positive news for us.”
However, this is not to say that American entrepreneurs are completely at ease. Although most small business owners are optimistic about the economy and are even looking forward to hiring more workers in the coming months, COVID-related factors, such as inflation, remain significant roadblocks. In fact, inflation has topped the list of concerns for six consecutive quarters, according to the U.S. Chamber of Commerce’s research. “While the good news is that the stock market is responding to lower national inflation, the unfortunate truth is that small businesses haven’t necessarily felt that relief yet,” Sullivan warns.
The second most significant concern is the labor shortage, which has hit small businesses especially hard in 2023. While larger companies have natural advantages when it comes to attracting talent, entrepreneurs are hindered by the massive workload that comes with owning a company. “If they can’t find workers, it means they’ve gotta do it themselves,” comments Sullivan. “We see that type of pressure kind of bleeding down these small businesses day in and day out.”
Interest rates have also become an issue affecting entrepreneurs. In an effort to tame inflation, the Federal Reserve has persistently hiked rates throughout 2023, making it more difficult and expensive to access critical funds. Although the bank is currently weighing its next move, anxieties have flared amongst the small business community. “We asked small businesses how they’re feeling about interest rates,” Sullivan notes. “We saw a jump…of ten percentage points of small businesses saying that rising interest rates are pinching their growth plans.” An additional 50% of respondents, he adds, told the U.S. Chamber of Commerce that they were forced to put their growth plans on hold.
Loan access has also tightened since the start of the year, a trend that gained steam after the failure of Silicon Valley Bank in March. However, Sullivan notes that small business owners have escaped from the banking crisis relatively unscathed since credit demand happened to sink just as availability began to fall. Although this means that entrepreneurs could be seriously affected once that demand returns, there are other elements protecting companies from the worst outcomes. “The good news though is that over the past four years with PPP, pandemic recovery and then some bank failures, you see small businesses with better relationships and prioritizing relationships with their community banks and other lends at an all-time high,” he explains. “And so that actually bodes well for small businesses that are looking for capital to grow.”
The U.S. Chamber of Commerce is working hard to ensure that small businesses have the support they need for success, regardless of whether the economy thrives or stumbles. One area the administration is looking to reform is immigration in the hopes of solving the country’s labor shortage. Sullivan notes that even if every unemployed person in the U.S. found a job, there would still be millions of positions left open. Opening pathways to legal citizenship would thus help plug the gaps. “There are dozens of tweaks that can be made to the existing immigration system that will help solve the problem of worker shortages without upsetting the entire apple cart of immigration debate which can be so controversial,” he notes.
The Chamber is also working with Congress to keep an important COVID-era tax policy in place. Sullivan notes that the 20% tax deduction helped many small businesses and entrepreneurs stay afloat during the pandemic and provides an extra layer of stability as the economy works to regain its full health. Bipartisan support has already begun to coalesce around the idea. “Republicans and Democrats are actually coming together on issues like keeping the 20% deduction, that so many small businesses have taken advantage of, permanent,” remarks Sullivan. “We’re pretty optimistic that…we’ll see the permanency in place before it expires at the end of 2024.”
To learn more about the U.S. Chamber of Commerce and the work it does to support small businesses, visit its website here.