Small businesses are an important sector of the economy. In fact, 99.7 percent of U.S. employer firms are small businesses – defined as an independent business with fewer than 500 employees. This does not count the over three-quarters of small businesses that have no employees other than the owner. 73.2% are sole proprietors, generally taxed as individuals.

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Small business trends, thus, have a strong effect on the economy as a whole – and right now they are not looking good. Small business optimism, according to the NFIB Research Foundation, has been “absent” for 89 out of the last 91 months. This means small businesses are mostly in maintenance mode, making few or no capital outlays and not hiring additional personnel. On the other hand, the third most important problem cited by small business owners is difficulty findingqualified workers. Only 24 percent of small business employers in NFIB’s last survey raised worker compensation. This marks a sluggish recovery and has a knock on effect to consumer optimism, especially for small business owners, who may not want to spend the money they do have in case things go bad again. Employees who are not getting raises end up with less money to spend, especially as home prices and rents continue to rise.

U.S. Bank did a survey of their small business customers in spring of 2016 that indicated an increase in the number of business owners that think we are in a recession. The stock market has been highly unpredictable, and global events including Brexit and the turmoil in Turkey have not helped the global economy and overall consumer confidence. 25 percent of the surveyed businesses expect to add staff. Despite this, there was a strong overall revenue growth for small businesses in 2015. The survey also showed that urban businesses owned by younger minorities had the strongest growth in 2015 and have the highest optimism for 2016.

The outlook, thus, is mixed, and confidence appears to be lower than the actual statistics show. Overall, the small business sector is likely to grow at a modest rate and continue to be important to the economy as a whole.

Sources:

http://www.nfib.com/surveys/small-business-economic-trends/ 

https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

2016 Outlook: Economic Predictions for Small Business Owners

http://www.thefiscaltimes.com/2016/05/06/10-Trends-Driving-Housing-Market-Now

https://stories.usbank.com/dam/Documents/SlideDeck.pdf

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