US Economy

The President Changed. So Has Small Businesses’ Confidence.

Landon Thomas Jr.
President Donald Trump delivers to small-business owners, at the White House Jan. 30, 2017.
Getty Images

The cream of the small-business community here tucked into their lunch on a top floor of a bank building and pondered the question put to them by their local lender's economist.

More than any other president since Ronald Reagan, President Trump is moving to strip away regulations and slash taxes, said Jeffrey Korzenik, an investment strategist with Fifth Third, a large regional bank in the Midwest and Southeast. In meetings with clients, Mr. Korzenik has been making the case that these policies will rouse the slumbering animal spirits in businesses across America.

"And now we have seen this huge spike in small-business confidence since the election," Mr. Korzenik said, pointing to a chart. "So I have to ask you: Do you feel more confident now?"

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There was a moment of silence, broken only by a howling northwestern Ohio wind that rattled the floor-to-ceiling windows in the bank's boardroom.

Then, with rapid-fire speed, came the responses.

The president of a trucking company spoke of a "tremendous dark cloud" lifting when he realized he would no longer be feeling the burden of rules and regulations imposed by the Obama administration.

The owner of an automotive parts assembler gave thanks that he would not be receiving visits from pesky environmental and workplace overseers.

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And the head of a seating manufacturer expressed hope that, finally, his health care costs would come down when the Affordable Care Act was repealed.

"My gut just feels better," said Bob Fleisher, president of a local car dealership. "With Obama, you felt it was personal — like he just didn't want you to make money. Now we have a guy who is cutting regulations and taxes. And when I see my taxes going down every quarter — well, that means I am going to start investing again."

While much has been made about the stock market's nearly 14 percent rally since the election, economists say that when it comes to assessing the genuine potential for the United States economy, confidence among small-business owners is a more grounded and forward-looking indicator.

Companies that employ several to a few hundred workers make up 99 percent of business in the United States and account for half of private sector employment. So for all that General Electric, Caterpillar or Ford Motor talks about building factories and hiring workers, the $18 trillion United States economy will not truly move until the burghers in Toledo and other parts of the country start to invest and add jobs.

The exuberance of small-city executives in Toledo, of course, represents just a small slice of the national economy — an economy whose recovery had already been showing signs of gaining momentum. And their euphoria is being fed by promises, like a tax overhaul, that have not yet been kept.

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Still, the views from the Toledo lunch are very much in tune with what business leaders, large and small, have been consistently saying in the months since the election.

Billed as a C.E.O. round table, the event felt more like a boisterous group therapy session as one businessman interrupted another with competing tales of Obama-era regulatory woes.

But all 11 executives agreed: Never in recent years had they been so bullish about their businesses as they were now under a president (and fellow small-business owner, albeit a very rich one) whom they see as one of their own.

Which is why Mr. Korzenik was so excited about the recent surge in the small-business confidence index, as measured by the National Federation of Independent Business, the industry's trade group.

In the month after Mr. Trump was elected, the gauge showed the largest monthly increase since 1986. And it has continued to reflect consistent gains as the president pushes for lower taxes, fewer regulations and a repeal of President Barack Obama's health care initiative.

Of course, the jump came off low levels. Since 2009, the index had been either on a downward trend or barely moving up as small businesses struggled to recover from the financial crisis. A heavier regulatory burden and uncertainty born of a weak economic recovery have kept small-business owners from making big bets in investments or hiring.

But in Toledo, this reluctance is changing — and quickly.

Louis M. Soltis owns a small company that manufactures control panels for large factories and machines. After four years of not adding to his work force of 22, he has seen orders for panels jump in the last two months and is looking to take on as many as six new workers.

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There may not be a direct correlation between his surging order book and the new president, but there is no doubting the psychological boost.

"That guy is a junkyard dog, doing his tweets at 3 a.m. and taking on the news media — I just get strength from him," Mr. Soltis said over a wine-soaked dinner with a large group of his small-business friends and peers from around town. "And I have to say, it makes you feel gutsy — ready to step up and start investing again."

The restaurant sits on the eastern bank of the Maumee River, offering up a view of the modest Toledo skyline. For years, many of the taller buildings have stood empty as this largely industrial city, a bit more than an hour's drive south of Detroit, suffered from the automotive industry's decline.

Of late, the local economy has been recovering as thriving industries like health care have picked up the slack, and the unemployment rate, at 4.7 percent, stands exactly at the national figure of 4.7 percent for February. The latest employment data, released on Friday, showed that 235,000 workers were added to payrolls nationwide last month.

Mr. Soltis is not the only small-business leader to report a sharp pickup in activity.

Barton S. Kulish, the president of MTS Seating, which makes seats and tables for restaurants and offices, said that his sales were up 38 percent after the election. Since the beginning of the year, he said he has had to bring on eight more workers (and plans to hire an additional 12) to his 418-employee company.

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Bryan Keller, the chief executive of Keller Logistics, said a sharp rise in trucking orders since the election prompted him to recently increase his shipping rates.

And the local real estate market is still buzzing with news of a 300,000-square-foot industrial space, which, after drawing little interest for the better part of a year, suddenly became the target of a frantic bidding war among three local parties before finding a buyer.

Yet there is a downside to animal spirits that persist too long, especially in labor markets, like Toledo's, that are operating on the tight side.

And that is a sharp uptick in inflation.

In his presentation to Fifth Third's banking clients, Mr. Korzenik raised this issue, suggesting that the broader economy was in the "seventh inning" of what has been a pretty long business cycle.

He also noted how the opioid epidemic in the Midwest had made it harder for companies to find qualified young people ready to work — a comment that elicited nods from around the table.

Still, no one in the room seemed overly concerned. As the group saw it, the party was just beginning.

"Most businesses I know are just taking a deep breath, happy that there is finally someone in the White House who understands what they do," said Mr. Fleisher, the owner of the Lincoln car dealership. "So you say we are in the seventh inning — well, I am not sure we are."