Economic optimism among Republican small business owners has begun to wane this summer, following record-high positivity in early 2017. According to a recent survey of 3,576 small business owners on Thumbtack, optimism among Republicans is down 11 percentage points from January, from 89 percent to 78 percent.
These numbers aren’t necessarily reflective of sentiment within the country at large, however. According to a recent survey from Vox/SurveyMonkey, for most Republicans (not just those owning a small business), the economic outlook today is much the same as it was back in January.*
What’s Behind This?
So why is partisanship’s impact on economic expectations declining for Republican small business owners, but not the country at large?
For one, small business owners get more real time information on how the economy is performing week in and week out. Unlike workers who aren’t self-employed and tend to make the same paycheck every month, regardless of what’s happening in the broader economy, small business owners’ incomes are intrinsically tied to the strength or weakness of their local economy, giving them a unique vantage point when considering their economic future. Put simply, small business owners are also more in touch with fluctuations in their local economy, giving them a pulse on economic changes even before national trends emerge.
The tempering of (once sky-high) Republican optimism also reveals a fundamental change in what business owners are coming to expect of the new administration. While months ago this group had lofty hopes for the economy under the Trump administration, attention today is shifting away from policy makers in D.C. and back to economic factors at the local level. Our data suggests that this trend is likely to continue as tax and regulatory reforms continue to be pushed to the legislative back burner in months to come.
As evidence of this lack of change, there hasn’t been a dramatic decrease in what these small business owners identify as challenges to their business. The share of Republicans we hear from reporting that issues like access to credit, regulation, taxes, and inflation are affecting their own businesses has been mostly stable since January. As a result, this group is starting to realize that life as a small business owner under Trump may not be so different than it was under Obama, at least for now.
And instead of what happens in Washington D.C., they’re again paying closer attention to local issues. For example, small business owners across that board report struggling with local labor shortages this month, a particularly acute hurdle for small business owners. As Tom T., who owns a janitorial service in Columbus, Ohio, explains, “Hiring is my biggest problem right now, with unemployment so low in my area. I advertise locally and online through a service. If I schedule 10 interviews maybe one will show up, demand for labor in my area is so high.”
To be clear, this tempering economic optimism doesn’t mean Republican small business owners are starting to doubt their own their business prospects. Rather, their views on how their own businesses are doing have changed little since January. For example, the percentage of this group with a positive view on their own business’s profitability is essentially unchanged from January (71.17% then to 71.53% today). However, our data is clear that what economist Jeffrey Dorfman recently called the rise of “animal spirits” in the Republican small business community are starting to come back down to earth.
Shrinking Partisan Gap
As optimism among Republican small business owners surged in January, the gap in economic sentiment between small business owners across party lines was dramatic, with Republicans 31 percentage points more likely than Democrats to have a positive outlook on economic conditions moving forward. Since April, this gap has continued to narrow. As of June, the difference in economic sentiment between Republicans and Democrats sits at around 17 percentage points. But this shrinking partisan gap can’t just be attributed to declining Republican optimism.
That’s because as economic confidence among the Republican small business community has fallen, it’s actually risen among Democrat small business owners, increasing by 4 percent in June. Today, 62 percent of self-identified Democrats are optimistic that their business conditions will improve in the months to come. This is among the most positive this group has been on the economy since President Trump took office in January.
Illustrating this dynamic, Mary T., who owns and operates a remodeling company in Madison, Wisconsin, told us that while she’s worried about the Trump Administration, she’s gaining “more confidence in the economy as construction is in a boom period.”
While the gap between Republicans and Democrats narrows, small business owners identifying as Independents continue to hold course, with little change between January and June. Sentiment among Independents closely mirrors what small business owners are feeling overall: 68 percent of Independents look positively on their economic outlook in the coming three months, a figure almost identical to the national average of 70 percent overall.
The Gender Divide
While the persistence of a partisan gap among both small business owners on Thumbtack and the population at large isn’t surprising given today’s political climate, another gap is. According to a recent report by The Wall Street Journal, the difference in economic expectations between men and women in the U.S. has never been wider.**
Though the gap has narrowed some since reaching a high-water mark in April, the 17 percent difference between the economic expectations of males and females in the general population is considerably wider than that among small business owners on Thumbtack, with 72 percent of male pros reporting positivity versus 68 percent of female pros (a difference of only 4 percentage points).
About the Thumbtack Economic Sentiment Survey
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 fifth 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 across the United States. Because they are hard to reach, these professionals are frequently overlooked in other surveys of small businesses.