Election season comes every year, it seems. Federal elections return every two years, state and local elections happen then and in the between years, as well. Some candidates are on television, radio, your favorite social media platform, even in your computer’s email or cellphone’s text inbox every month. And these days, many have the same pitch: the economy is (fill in the blank).
In 1992, campaign strategist James Carville coined the phrase “It’s the economy, stupid.” At that time, Carville was attempting to emphasize the importance of the struggling economy in then-candidate Bill Clinton’s 1992 presidential campaign. Although originally intended for an internal audience of campaign workers, the phrase became a de facto slogan for the entire campaign. It still pops up every chance it gets.
How you define “economy” makes a big difference in how you view it. Looking for work? Employment and unemployment statistics are scanned to see how the economy is doing. For small business owners, taxes and regulations imposed by the state and local governments rank high on the issues that create “the economy.” How states rank in these two categories can make or break their rating in survey after survey, causing optimism or pessimism in the business community. Taking the pulse of the small business community then becomes a key metric to how the economy is doing.
Rank of Business Friendliness
Thumbtack, the home management platform, has been doing small business surveys since 2013, ranking states and cities on how they present themselves to local businesses. Its 2022 Small Business Friendliness Survey, where small business owners evaluated federal, state, and local government support of small businesses, just came out. Thumbtack professionals within home maintenance, home construction, and the home systems industries accounted for 34% of the respondents.
Thumbtack’s survey represents the largest continuous study in the U.S. of small business perceptions in the local services industry on government policy. The eight graded metrics evaluate overall government support, ease of starting a business, ease of hiring employees, labor regulation, tax regulation, licensing regulation, and training and networking programs availability and helpfulness. Enough data was collected to grade 43 states and 20 metropolitan areas.
If your business is in one of those 43 states, you’re probably not happy with the way things are going. Surveying more than 2,800 small business owners, the project found a stark decline in optimism around the economy compared to years past, with 49% of all service professionals anticipating business conditions worsening in the next three months. Following an initial surge in government support to help mitigate the economic impact of the pandemic, small business owners now report feeling like the government is failing them, with 21 states receiving a failing mark when graded on small business friendliness, regulations, taxes, training opportunities, and more.
Only 25% of small business owners consider the federal government to be supportive of skilled professionals like them, increasing slightly to 30% for state government, and 32% for local government, showing there’s room for improvement. According to small businesses, the top ways that governments can support local professionals include:
- At a federal level: Lowered (48%) and simplified (46%) taxes.
- At a state level: Reduced and streamlined regulatory and licensing requirements (49%) and expanded access to/improved training and educational programs (43%).
- At a local level: Investments in local transportation and infrastructure (43%) and expanded access to training programs or improved training and educational programs (43%).
Small business owners rated government small business friendliness with an overall decline in grades across the board compared to previous years. The federal government received an “F” grade this year, a decline from last year’s “C+,” indicative of the overall downturn in sentiment among small businesses.
This year, most states received below-average grades. Delaware received the highest grade of an “A+” and was the only state to receive an A rating, followed by Idaho with a “B+” and Arkansas with a “B-”. Florida and Mississippi received “C+” grades; Hawaii, Maine, and Oklahoma received “C” grades; and Colorado, New Mexico, Rhode Island, South Carolina, and Utah received “C-” grades from local service professionals. The number of states that received an “F” ranking quadrupled this year, with fourteen states receiving the lowest grade. To see how your state ranked, check out the interactive map.
Cities follow States
City findings mirror state results, with 70% of areas receiving failing grades. Only three cities received above average ratings this year: Boise, ID (A-), Orlando, FL (B+), and Providence, RI (B). Out of 20 cities, eight received an “F”: Chicago, IL; New Orleans, LA; New York, NY; Oakland, CA; Phoenix, AZ; Portland, OR; San Francisco, CA; and Washington, DC.
When asked about concerns that there is a looming recession, small business owners cited work slowing down (37%), as their greatest concern, followed by a fear of not being able to support themselves (34%). With continued economic uncertainty, small businesses are having to take action to stay afloat. 72% of small businesses are charging higher prices than a year ago. This results from higher prices on materials and supplies and energy/gas.
Current economic conditions are also impacting how small business owners are thinking about the future of their businesses, both from a retirement and potential expansion perspective. A majority (64%) of small business owners looking into retirement options have delayed their retirement due to financial concerns. An additional 20% want to retire but don’t have someone they can sell or leave their business to.
On the other hand, almost two-thirds (61%) of respondents stated that they are interested in expanding their business. Twenty-nine percent plan to do so within the next year, while 15% say they’re waiting until economic conditions improve. While there’s a clear desire to invest in their businesses, hiring has remained a pain point for small business owners over the past year as 69% of respondents have faced at least one hiring obstacle in the past year and more than half of respondents who hired employees in the past year (52%) said it was difficult to do so.
Customers Come to the Rescue
While small businesses feel uncertain about the future, consumer desire to support small businesses remains strong. Insights from more than 1,000 consumers in a survey found that over one-third (37%) of Americans are directing more spending toward small businesses now as compared to last year and the average consumer is willing to pay a 10% price increase to support a small business over a national retailer. Supporting small businesses remains top of mind for consumers, with 80% of Americans giving at least some consideration to using small, local businesses in their day-to-day spending and of that 80%, roughly 50% say it is their primary consideration or a strong consideration.
“Current economic conditions and waning government support from the pandemic are leaving small businesses feeling worried about what the future holds. As inflation continues to impact most industries, it is crucial that government organizations, at all levels, band together to support small businesses,” according to Marco Zappacosta, Co-Founder and CEO of Thumbtack.
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