Since March, entrepreneurs have become more optimistic about their business prospects.
- On a scale of 1 to 100, respondents said their overall business outlook was a 73 – the highest response since summer 2018 and an 8-point jump since February.
- Confidence in the U.S. economy, however, increased from its spring 2019 figure by 1 point to 63.
- Among existing business challenges, 20% said healthcare topped their list, followed by meeting federal employment regulations (14%).
A new survey from Paychex suggests businesses expect a bright future moving forward, despite warnings of the opposite being true. When it comes to issues like hiring and retaining qualified employees, finding new customers, and weathering another economic recession, business owners feel their future is bright. In fact, American business owners haven't felt this optimistic about their prospects since summer 2018, according to the payroll services company's latest Business Sentiment Report.
Based on a scale of one to 100, with one representing the most pessimistic outlook and 100 representing the highest level of optimism, the report found that business owners pegged their overall business outlook at a 73, marking an 8-point increase from February. Overall optimism in the American economy scored a 63, marking just a 1-point bump from this past spring.
Many factors influence the overall sense of optimism, according to researchers. One such factor is the low interest rates on loans, which pave the way for business owners to invest in capital improvements. The corresponding category for that saw a 21-point spike to 74, while access to capital saw a 12-point bump to 76.
Confidence in the ability to raise wages saw a 26-point turnaround from the spring 2019 report's score of 41, with business owners scoring a 67 in that category. Officials said such a massive shift could mean that the "labor market is loosening." Owners also answered that their ability to retain employees, largely thanks to better benefits packages and perks, was at a 78.
How demographics affect business optimism
A business's potential for growth and success depends on a wide range of factors. To reflect that, the Business Sentiment Report examined how things like a company's geographic location and the population density surrounding it affect a business owners' outlook.
When it came to overall business outlook, all four segments of the country were relatively close to one another. The southern portion of the country was the most optimistic in this regard with a 76. The West, Northeast, and Midwest were close behind with a score of 73, 72, and 71, respectively.
Their confidence in the U.S. economy, however, saw a major gulf form between the Northeast and the rest of the country, as business owners in that part of the country were the most pessimistic, with a score of 54. Everywhere else in the country, however, saw at least a 10-point increase, with the American South rating the economy at a 64, the West giving a 65 and the Midwest giving a 70.
Along with looking at general geographical regions of the country, researchers designated business locations by the type of area they were in – either rural, suburban or urban population centers. What they found was that all three types of locations were still confident in the economy.
Businesses located in rural areas tended to be the most optimistic about the U.S. economy at a 69, with suburban (62) and urban (58) not too far behind. Each area saw gains in that metric.
As for businesses and their confidence in their own outlook, again, rural companies were the most optimistic at a 75. Urban businesses ranked their optimism at a 73 and suburban businesses ranked theirs at a 71.
Company and industry matter
Among the business owners that responded, researchers said those in the manufacturing industry were the most optimistic about the U.S. economy with a 69. This marked the fourth consecutive report that the sector remained at the top of the charts, though this latest report marks a three-point drop. Retail gave a 65 on the economy, while professional services came in at 55.
All three of those sectors were confident in their overall business outlook, with retail giving a 73, manufacturing giving a 72 and professional services giving a 71. The optimism was particularly high in the three sectors' ability to retain employees, with manufacturing coming in at a noteworthy 84, professional services at a 78 and retail at a 77.
In addition to the industries that felt the best about their prospects, researchers also looked at the sizes of companies and found that companies with 20 to 99 employees were the most enthusiastic about their future with an 83. Companies with 100 to 500 employees reported an 80, while companies with one to 19 employees reported a 73.
Business owners were generally optimistic about their ability to raise wages, with companies with fewer than 20 employees reporting the highest quarterly increase from 39 back in February to 66 in this latest report.
Owners have an impact, too
When it came to individual owners' thoughts, researchers also looked at who was saying what. By categorizing each respondent into age groups and by genre, officials said they sought to see if those factors played a role in their optimism.
According to the survey, younger business owners and their confidence were largely "on par with owners who could be three times their age." Owners between the ages of 18 and 38 said they were confident in their ability to find new customers (78), to make capital investments (79), to withstand a recession (75) and to raise wages (75). Researchers said those figures could stem from the fact that younger business owners are more easily capable of "understanding and adopting new technologies."
Researchers found that business owners age 55 and older were more confident in the U.S. economy than their younger counterparts, with the former at 65 and the latter at 59.
Gender also played a big role in this latest report, with researchers finding that men and women felt similarly in many categories, with differences landing between 7 and 10 points.
Researchers said a 21-point boost in women's optimism in accessing capital (73) was notable compared to the seven-point increase that men reported (80) in that criteria. Men and women were also optimistic about the economy (68 and 59, respectively), and they were both confident in their overall business outlooks (75 and 70, respectively).