Economic optimism among American small business owners continues to soar into March, reaching its third-highest level since the survey began four years ago. With sentiment up by 8.5 percent since October 2016 and over half of the 5,522 small business owners we surveyed reporting that they believe their business is set to improve, the signs of growing positivity are impossible to ignore.
But there’s a bit more to this month’s economic story.
The Partisan Economic Lens
Exactly how good these small business owners feel about their economic future has a lot to do with where they’re sitting along the political aisle. Since the inauguration of the new presidential administration in January, economic optimism has continued to diverge along political lines.
While 75 percent of self-identified conservatives believe that general economic conditions will improve in the next three months, only 33 percent of liberals share this sense of optimism. And whereas only 2 percent of conservatives reported pessimism about their financial future, that number is considerably higher among liberals, 22 percent of whom believe that their business conditions are set to worsen in the months to come. Results from January paint a near-identical picture.
Voices From Behind Party Lines
The split between Republicans who believe the economy will worsen and those who believe it will improve is consistent with the numbers we saw among conservative respondents (a 75/2 split), and responses from liberals and Democrats varied by less than 4 percentage points.
What does this tell us? Much like political leanings, party identification plays a huge role in how small business owners view the economy around them.
Some feel optimistic.
Bob, a roof repairman in Georgia and a member of the Republican party, told us that the new presidential administration has been boosting business in his state. “The old economy in general is going out, and the attitude and energy around here has changed. Everywhere I go there are ‘help wanted’ signs up at mom and pop businesses,” he said.
Others lack this sense optimism.
“I have seen a change in my employees’ attitudes—there is a lot more fear and apprehension about what their future holds than ever before,” Kenneth, a property manager from Indiana explained. The self-described Democrat was equally forthcoming about what he sees as the reason why. “You hear the president say one thing and within five minutes there’s evidence that it’s not true,” he told us.
The Presidential Divide
The trend extends beyond party loyalty. There is a clear correlation between the way small business owners feel about their future economic success and how they feel about President Trump today.
Professionals who approve of the new administration are four times more likely to say that their economic conditions will improve than stay the same or decline.
Bob (our roof repairman) told us that he could feel a lift from Trump administration policies already. “Everything has been doing better since November and I think that reason is the different tax codes that Trump is putting into place,” he explained. And these changes aren’t just happening at the national level, Bob told us. “I see it in my own business already,” he said.
Among professionals who disapprove of President Trump—only a third of whom believe their economic conditions will improve in the near-term—the new administration’s economic story is markedly different.
“Instability and the unknown of what’s going to happen in the future will affect any plans for expansion that we might have had,” Kenneth told us of his Indiana property management company. He called the new president’s policies both politically motivated and shortsighted, and explained how these laws might undermine his business in the long-term.
“I manage a lot of rental properties,” Kenneth said. “If my customers start losing jobs because of policies that make it hard for them to keep their jobs, they won’t be able to keep their housing.”
One Caveat: The Local State of Mind
With an even split between Republican and Democrat respondents (23 percent each), and considering the strong partisan influence acting on either group, the question becomes:
Why is overall economic sentiment still so overwhelmingly positive this month?
One answer is that many small business owners feel their success is unrelated to that of the economy as a whole.
Take Roxanne, a private dance instructor in Texas, as an example. Though Roxanne strongly disagrees with President Trump’s policies, she’s unsure that these new laws will have an impact on her business. “I don’t know that my business will change because of the administration,” she said. “I think businesses are like roller coasters—they move up and down in cycles.”
Political ideology has no statistically significant effect on business owners’ expectations for their own financial future. According to our data, 82 percent of conservatives, 81 percent of moderates, and 79 percent of liberals feel their business will be better off in the next three months than it is today—and 80 percent of respondents who disapprove of Trump agree.
The other thing to remember is that most small business owners aren’t pure partisan actors: 53 percent of our survey participants report no party identification and have a political ideology between liberal and conservative. And these respondents, while less optimistic than the strongest supporters of President Trump, are still mostly positive—just over half expect general economic conditions to improve moving forward.
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.