Despite constant reassurances from Washington in recent months that the U.S. economy remains on a resurgent path, some business owners are starting to lose optimism as they head into spring, according to a recent study.
Released yesterday by Paychex, the company's latest Business Sentiment Report reveals a growing tide of concern among business owners on a number of topics. Five hundred business owners with 500 employees or fewer were selected at random to participate in the report between Feb. 15 and 26.
While officials said that "several factors could have affected the change," they noted that the survey in question took place shortly after the federal government was shut down for 35 days over funding for a proposed southern border wall, as well as President Donald Trump's State of the Union address on Feb. 5.
Each factor studied in the report was given a numerical value on a scale of 1 to 100. The higher the number, the more optimistic business owners were on a particular topic. According to the report, respondents' overall outlook dropped from a 71 in October 2018 to the latest figure of 65. Business owners' confidence in the American economy also saw a three-point drop to 62.
Where business owners remain the most confident
While the report's figures showcase a general downturn among polled business owners, Paychex officials pointed to some of the metrics that remain at positive levels.
"These results still reflect a positive outlook among business owners," Paychex President and CEO Martin Mucci said.
According to the report, respondents generally remained positive about their overall business outlook, with a final score at 65 points. This figure marks a six-point drop since the fall 2018 report and mirrors the summer 2018 report. Respondents also said they remained largely confident in their ability to access capital, with the latest figure of 64 out of 100 only marking a one-point decline.
Respondents were equally optimistic about their ability to find new customers, as well as the overall U.S. economy, with the report showing a 62 out of 100 result. Officials noted this latest figure represented a respective three-point and six-point decline.
Pessimism among business owners
While business officials remained largely confident in some areas, others saw steep declines since last October. Mucci said these declines could be attributed to lower figures "primarily around hiring and the ability to raise wages."
According to the report, business owners' confidence in their ability to make capital investments saw a nine-point decrease to 53, while their ability to raise wages dropped by 10 points to 41.
Similarly, participating business owners said they were less confident in their ability to fill open positions with qualified candidates. The latest report shows a 43 out of 100 result in this area, which is down by eight points from the previous report.
"This is the lowest level of confidence in employers' ability to fill openings with qualified workers that we've seen since starting the Business Sentiment Report in July of last year," Mucci added. "While jobs growth remains steady, business owners are still having a hard time finding candidates with the right skill sets to meet their needs in today's tight labor market."
Other metrics to consider
Along with business owners' general feelings on the big picture, the latest Business Sentiment Report investigated several other factors.
Respondents from larger companies were more likely to feel fine about the current state of affairs. Businesses with 100 to 500 employees generally had a better business outlook (80/100) than their counterparts with 20 to 99 employees (71/100) and those with one to 19 employees (65/100). Larger companies were also more optimistic about the economy (75/100), their ability to raise wages (82/100) and their ability to fill open positions (80/100).
Bigger businesses were also more enthusiastic about the current regulatory environment in Washington, responding with a 77 out of 100 mark. Compared to those businesses with one to 19 employees, that figure represents a 27-point gulf between the two groups, with the smallest group reporting their confidence was at 50 out of 100.
If confidence in the American economy is apparently on the decline among business owners, what are their thoughts about its expected slowdown and potential recession? Officials said the outlook for how "recession-proof" each group felt depended on their size. Companies with fewer than 20 employees were less confident than their larger counterparts.
According to the figures, 34 percent of companies with one to 19 employees said they were not confident in their ability to weather another recession, compared to 15 percent of those with 20 to 99 employees and 9 percent of companies with 100 to 500 employees.
The inverse occurred when asked if respondents were very confident in their ability to outlast a recession. Larger businesses stated they could manage (54 percent), while only 19 percent of the group with one to 19 employees said they'd make it.
The Paychex Business Sentiment Report for spring 2019 is publicly available online.