How good is the current economy for today’s small business owners? The answer to that question has less to do with revenues and profits and more to do with what political party they support.
That’s the conclusion of a report released this week from CNBC and SurveyMonkey. Their quarterly Small Business Confidence Index found that most small business owners were happy with the current economic conditions. But the devil’s in the details. When broken down, the numbers showed that most of those small businesses that were happy with the economy are actually owned by Republicans (68%). Only 34% of small businesses owned by those affiliating with the Democratic party said that the economy was good.
This isn’t just an anomaly. The report, which is produced quarterly, has consistently shown double-digit differences between Democrat and Republican small business owners across all industries when it comes to their economic confidence and outlook.
The latest report, which surveyed more than 2,000 business owners in mid-November, found significantly different viewpoints on the effect of political events in Washington on their businesses. For example, Republican business owners felt that the current impeachment proceedings would have a significant negative effect on their companies, much more so than their Democrat counterparts. However, rising deficits and a government shutdown were more of a concern for Democratic business owners.
Hmm. So what about all those other small business surveys?
Each year there are dozens of studies published regularly by organizations like the National Federation of Independent Businesses, The US chamber of commerce, Bank of America, Wells Fargo and others that measure the confidence and optimism of small business owners. But none of these studies really dig deep down into the political leanings of those respondents. Why not? Isn’t this important?
I think it is very important. It’s important because it’s 2019 and you can’t ignore politics any more when asking for opinions.
It’s also important because this data gets reported and used by people, politicians and brands that make buying decisions. There are 30m small businesses in this country. They employ more than half of our workers. If they’re optimistic, confident and happy then the economy is good, right? But wait … if their so-called optimism is really influenced by their political leanings, then maybe things aren’t as good?
Before economists and the media conclude that things are great or not-so-great for small businesses based on all these surveys, they may well be better advised to consider those same business owners’ politics. Knowing more about the respondents will give us a deeper understanding of their optimism and confidence. It may also cause us to question some of those surveys’ conclusions.
Is there better data about small business confidence? I think there is – it’s payroll. Each month the big payroll service firms Paychex and ADP publish employment and wage data from their enormous customer bases, which are mostly made up of small- and medium-sized companies. Just this week, for example, Paychex reported that hourly earnings grew 3.11% among employees of small businesses in November, the highest level since their reporting began in 2011. ADP also reported a big jump in small business hiring for October. This data isn’t based on opinions or sentiment. It’s based on dollars and cents.
When small businesses are hiring and paying more, that’s all the proof I need that things are going well. All those “optimism” and “confidence” surveys may be interesting, but if they’re not disclosing the political leanings of their respondents they’re missing something important. In the end, if you really want to know how confident small businesses are about the economy, just follow the money.