Small business sentiment is on the rise to kick off 2020, with confidence nearing all-time highs, according to data from CNBC and SurveyMonkey. The CNBC/SurveyMonkey Small Business Confidence Index climbed two points in the first quarter, from 59 to 61, as concerns over trade policy impacts lessened, thanks to a trade deal with China and the signing of the USMCA. This is a sharp turnaround from the lows seen last summer as trade turmoil weighed on Main Street's outlook.
The Small Business Confidence Index is calculated based on entrepreneurs' responses to a set of eight questions about their businesses as part of the CNBC/Survey Monkey Q1 Small Business Survey. That poll was conducted Feb. 3–10 among a national sample of 2,118 small business owners ages 18 and up.
While confidence increased, the move can be attributed to more business owners feeling less pessimistic about issues like trade, moving to a more neutral position. If small business owners had turned positive on their outlook, the confidence index could have risen even further this quarter.
"It's not that everyone is feeling optimistic — things are moving to the middle," says Laura Wronski, senior research scientist at SurveyMonkey. "There's now a higher percentage of people who don't expect any impact from things like changes in trade or tax policy."
In the next 12 months, about one-fifth of small business owners expect a negative impact from changes in trade policy, while 26% expect a positive effect — more than half say the changes will have no impact. Of the small business owners that said either deal would impact their operations directly, most came from the retail sector.
"There was a lot of worry about tariffs and the trade war that has been abated due to the agreement with China," says Todd McCracken, president and CEO of the National Small Business Association. "Those concerns about what would happen with trade and supply chains are less worrisome than they were."
Generally, business owners are feeling more positive about business, with 56% saying conditions are good and only 7% saying the opposite. Recession fears have also calmed down somewhat, with 49% of businesses saying a recession is likely in the next year, down from 53% this same quarter in 2019.
Jobs and the economy came in as the top issues for one-third of respondents, followed by health care, the environment and immigration. Finding qualified workers to fill positions remains the biggest challenge for 19% of respondents, the same percentage of respondents who deemed this their biggest hurdle in Q1 2019.
"They've got no simple solution. We are a victim of our own success, since the economy is doing so well," McCracken says. "It's hard to find workers for that next opportunity."
Even as workers are in short supply, there's little movement on wages. In fact, 70% of respondents said that if one of their employees were to quit today, they would expect to pay their replacement the same; just 14% said they would expect to pay more. With regard to minimum-wage increases kicking in across the country, nearly half said they expected wage hikes to have some impact on business, with 22% projecting lower profits and 14% saying hikes would force them to cut hours and 8% saying increases would lead to layoffs.
While there are some unknowns at this early stage in the election year, President Donald Trump's approval rating continues to climb, hitting a new high, with 64% approving of the job he is doing, while 36% say they disapprove. SurveyMonkey attributes this to the impeachment acquittal for Trump, as well as the fact that the survey was conducted as he gave his most recent State of the Union address. Small business owners surveyed tend to lean more right than center, says Wronski.
"Trump was acquitted in the impeachment trial, the Iowa caucuses were a bit of a fiasco, and the State of the Union speech is typically a time to really get your message out," she says of the approval jump.