Bolstered by a strong economy, small-business confidence is continuing to climb to record levels, even in the face of a potential trade war and an increasingly tight job market. In a deregulatory environment, jobs and the economy have become the top issue for small companies, outpacing health care and immigration, according to the latest CNBC|SurveyMonkey Small Business Survey.
The online quarterly poll surveyed more than 2,000 small-business owners from July 27 through Aug. 5.
The CNBC/SurveyMonkey Q3 Confidence Index hit a record high of 62, tied with results from the first quarter of 2018. Sentiment has climbed as companies expect to raise headcount — 33 percent plan to increase their number of employees in the next 12 months.
The index is calculated on a scale from 0–100 and is based on the responses to eight key questions. A zero indicates no confidence, and a score of 100 indicates perfect confidence.
Overall, 58 percent of respondents say business conditions are “good,” up from 53 percent last quarter and up from 39 percent a year ago. The data reflect similar findings from both the small-business group the National Federation of Independent Business and Wells Fargo/Gallup on Main Street confidence, which report levels at or near record highs.
“This feels like a much more solid footing because of the assessment of how things are going today for small businesses, with 58 percent saying conditions are “good,” said Jon Cohen, chief research officer for SurveyMonkey. “Some of this is because of opinions of President Trump, with 57 percent saying they approve of the job he is doing. But really it’s the underlying business conditions that have been improving steadily throughout his term.”
The dip in confidence last quarter was largely attributed to trade policy, and this quarter shows continued concern over tariffs and a growing partisan divide. More than a third of small-business owners expect that trade policy will have a negative impact on their business in the next 12 months, but that is much higher for business owners who identify as Democrats, at 58 percent.
When asked about tariffs on foreign companies specifically, 25 percent of small-business owners said tariffs would help, but again entrepreneurs were split by politics: Republican-leaning business owners were more likely to say tariffs will help, at 40 percent, while 65 percent of Democratic-leaning business owners said tariffs would likely hurt business.
“SOME OF THIS IS BECAUSE OF OPINIONS OF PRESIDENT TRUMP, WITH 57 PERCENT SAYING THEY APPROVE OF THE JOB HE IS DOING. BUT REALLY IT’S THE UNDERLYING BUSINESS CONDITIONS THAT HAVE BEEN IMPROVING STEADILY THROUGHOUT HIS TERM.”
Overall, 51 percent of small-business owners, including 50 percent of Republican businesses, say that free trade agreements help small businesses. Larger small businesses were more likely than their smaller counterparts to have already made, or planned to make, changes in response to tariffs.
“A big majority of respondents used to say trade policies would not impact them, and that is going down,” Cohen said.
Finding quality talent still a top issue
Small-business owners are reporting having open positions they cannot fill. Sixteen percent of small businesses say they’ve had open positions for at least three months, while 41 percent of companies with 50 employees or more say the same.
The responses highlight a stubborn problem hitting all areas of the economy as it continues to strengthen. In the NFIB’s most recent read on optimism, labor quality was also the top issue for small businesses, beating out taxes and regulation. In its latest poll, Wells Fargo/Gallup also noted that hiring quality talent was a primary issue for small businesses.
While almost half of all small businesses cite a lack of training as the reason for not filling jobs, a small group of respondents in the CNBC/SurveyMonkey poll (21 percent of the total sample) chose “other” in regard to the challenges in finding skilled labor, citing laziness and that some applicants claim wages are too low or are unable to pass drug tests.
“The bigger of the small businesses have the most trouble — all small-business owners point to workers lacking the right education and training, which is another consequence of the tight labor market,” Cohen said. “Either they are not finding the right employees or it is taking them longer to do so.”