American small business owners are seeing the glass half full this new year. Economic optimism is up this month, with over half of the 5,289 small business owners surveyed reporting the belief that business will improve in months to come. This marks the second month that optimism has been on the rise following four consecutive months of decline that ended in October.
Sentiment Improved Across the Board
Economic outlook improved across the board in December. Small business owners in the 15 largest states in the country reported growing confidence in their business’ success, and most markedly in Colorado, where sentiment jumped by 15 percent. In cities too, sentiment among professionals was overwhelmingly positive—of the 15 biggest metropolitan areas surveyed, only Seattle reported a drop.
Businesses were also hiring more in December. Over 31 percent of respondents indicated that they are expanding their payrolls this month, a record high.
The Political Story
Though this bump in optimism aligns closely with the results of the November 8th election, there’s not yet sufficient evidence to suggest the two trends are causally linked. While many of the small business owners we heard from found President-elect Donald Trump’s promise to promote business-friendly policies encouraging, many others were worried about how the new administration will affect the economy.
Feedback from professionals was mixed. An artist in Riverside, CA told us that Trump’s election was “exciting” because of his promises to cut taxes and reduce regulations that currently hinder her business. Conversely, a landscaper in Tacoma, WA said he worried that “a Trump administration will favor big businesses” at the expense of small businesses like his own.
Despite their differences in opinion, both individuals believed that the economy would improve in coming months, suggesting that there’s more behind the uptick than political ideology.
Unlike reports from other, broader polls of economic confidence, rising optimism was uniform for small business owners across all demographic groups this month—not just those likely to support President-elect Trump.
For example, the Conference Board’s survey of consumer confidence shows that while optimism in the U.S is up overall, Americans under 35 are actually feeling worse about the economy after the election, and according to data from the Pew Research Center the division between Democrats and Republicans on economic expectations is even more pronounced.
There are two likely reasons for this difference. First, the community of small business owners on Thumbtack is less ideological than the general public; more identify as moderates than liberals or conservatives. Secondly, because their income is tied directly to consumer demand, small business owners are more personally attuned to economic fluctuations than those with “sticky” wages, (i.e, ones that tend not to change).
The Seasonality Story
Politics aside, what else could be causing small businesses to feel this giddy? Despite what appears to be a huge bump in optimism, we found that economic sentiment is actually up by only one percent from last year. Small business owners tend to feel overwhelmingly positive around this time of the year, and there is good reason why. With the new year comes a new lease on consumer spending, and historically Thumbtack professionals are at their busiest coming into the spring, especially in categories such as wellness, home improvement, and professional services.
Considering that the rate of economic optimism has remained constant, we have good reason to believe that this December’s optimism has more to do with seasonal swings than national political news.
Every month, the Thumbtack Economic Sentiment Survey captures the attitudes and perspectives of thousands of business owners from across the country to gauge how they are feeling about the economy and their businesses. Now in its fourth year, this survey provides a unique vantage point on the economy, as respondents are largely mobile service professionals with five or fewer employees who operate in households across the United States. Because they are hard to reach, these professionals are frequently overlooked in other surveys of small businesses.