When the economy is strong, and unemployment is low, small businesses reap the rewards. The Bureau of Labor Statistics reported that 225,000 new jobs were created in January, and the current rate of unemployment is 3.6 percent. The countries thirty million small businesses played a significant role in stimulating economic growth. Similar to larger companies, small businesses have added to strong job growth by increasing their hiring. According to payroll processor ADP, business customers with 49 employees or less added 94,000 jobs in January and 66,000 during the previous month of December. Almost one-third of the jobs that opened up in January was at manufacturing operations.
- Labor force participation rate increased to 63.4 percent
- Jobless claims fell to 202,000, a 50-year low
- Payroll soared by 291.000, the most significant gain in 5 years
According to Juanita Carranza, Small Business Administration Administrator, “Small businesses are investing, expanding and creating new jobs, and more underrepresented Americans are experiencing upward economic mobility as a result.”
Rebounding from Trade Tariffs
After holding the lines on hiring during the past year, business owners are now willing to take more risks by adding to staff. Manufactures who were caught in the trade war between China and the Trump administration proceeded with caution due to the possibility that new tariffs would be enacted. When the U.S. and China signed a truce agreement, manufacturers could finally breathe a sigh of relief, and ramp up production. Economic instability and a shortage of labor in 2019 made it difficult for both business owners and manufacturers to move forward with confidence.
Lending is at a Record High
Low-interest rates prompt small businesses to refinance existing debt or apply for new loans to support short-term and long-term plans for growth. “The economy is strong, and optimism among small business owners is high, which creates a fertile atmosphere for small business lending. The bottom line is that if your business performed well in the past two years, banks would be willing to lend,” says Rohit Arora, BuzzCredit CEO. In January, the approval for small business loan applications at large banks reached 28.3 percent, a record high.
Favorable Business Climate
Hiscox, the leading small business insurer, recently published it’s 2020 Hiscox Small Business Owner Risk Outlook. The report surveyed 1.000 small business owners to get their opinions on various topics related to operating a business in the U.S. Overall, owners are optimistic. They believe the economic climate is favorable to small business. They remain focused on growing their businesses and making them more profitable.
- Fifty-seven percent feel better about the economy than they did a year ago.
- 60 percent feel optimistic because they’ve gotten new customers
- 51 percent expect profits to increase within the next twelve months
“Small business owners are risk-takers., so it should come as no surprise that in a strong economy they are looking to expand and grow the profitability of their businesses, “says Kevin Kerridge, Executive Vice President of Small Business Insurance at Hiscox USA.
What Concerns Small Businesses
While small business owners are optimistic about attracting new clients, this is also one of their primary areas of concern. Thirty-nine percent of respondents are worried about gaining new clients. Some of them are also concerned about remaining profitable. This issue was mentioned by thirty-four percent of participants.
- 17 percent see passing cost increases on to customers as a risk
- 17 percent are concerned about not receiving timely payments from customers
- 21 percent note taxes as the most pressing external issue
The economy has been cycling up for more than ten years, so it’s only natural to wonder when it’s going to take a downturn. Small business owners are doing more than waiting for the inevitable, ninety percent of survey respondents are taking the necessary steps to prepare for the decline. “Small business owners also recognize there are many factors that could alter their plans, so many have taken steps to prepare for a change in conditions while continuing to focus on activities that drive growth,” says Kerridge.