Growth in Business Optimism Spikes, Just Not Overwhelmingly on U.S. Economy
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Last Updated: 09/23/2019

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In the latest Paychex Business Sentiment report, U.S. business owners showed they are generally optimistic about retaining employees, accessing capital, finding new customers, making capital investments, filling open positions with qualified candidates, withstanding an economic recession, and even the overall business outlook. And, in many of the categories that repeated from the previous report in the spring of 2019, the changes were dramatic – some gaining points in the double digits.
Except one: their optimism in the U.S. economy overall, which gained a single point.
On a scale of 1-100, with 1 representing the highest level of pessimism and 100 representing the peak of optimism, business owners’ overall business outlook landed at 73/100 – the highest since the first report in Summer 2018 and an eight-point jump since February. Meanwhile, confidence in the U.S. economy overall landed at 63/100, inching up from 62/100 in the Spring 2019.
“I personally think that given the current political environment, businesses are threatened by a number of factors (such as) tariffs and rising labor costs,” said one survey respondent. “Plus, the economy is overdue for a contraction, so I tend to be bearish on the economy in 2020.”
However, there are factors that might help explain some of the significant increases, such as low interest rates on loans, making it more appealing for business owners to feel more optimistic about making capital investments – thus, a 21-point jump to 74/100 – and easier to access capital (a 12-point bump to 76/100).
Perhaps most surprising is the complete turnaround from the Spring 2019 report, where business owners’ confidence level in their ability to raise wages was at all-time lows since the Business Sentiment Report began in July of 2018.
“(The) economy (is) good here and growing,” said another survey respondent. “Wages (are) increasing, but not as fast as customers.”
While not quite as a dramatic a jump as this current report, the Paychex | IHS Markit Small Business Employment Watch is showing modest, yet steady, wages growth over the past few months for hourly employees (3.55 percent) and, to a lesser degree, salaried employees (1.92%). The 12-month trend for hourly earnings stayed nearly level at about 2.6%, while weekly earnings jumped almost 0.4 percent to just shy of 2.6% from earlier this summer.
Business owners also might be resigned to the fact that they do business in one of 21 states where the minimum wage increased in 2019 and to potential minimum wage increases in other states over the next few years. Their response to the ability to raise wages question might simply be a nod to the fact that they must comply with state and local wage regulations if they wish to stay in business.
Here’s a quick snapshot from the past three surveys reflecting some of the changes in outlook:
Item | Summer 2018 | Fall 2018 | Spring 2019 | Fall 2019 |
---|---|---|---|---|
Ability to Retain Employees (new question) | - | - | - | 78/100 |
Access to Capital | 62/100 | 65/100 | 64/100 | 76/100 |
Ability to Find New Customers | 69/100 | 68/100 | 62/100 | 74/100 |
Ability to Make Capital Investments | 59/100 | 62/100 | 53/100 | 74/100 |
Overall Business Outlook | 65/100 | 71/100 | 65/100 | 73/100 |
Ability to Fill Open Positions w/ Qualified Candidates | 50/100 | 51/100 | 43/100 | 72/100 |
Ability to Withstand an Economic Recession (new question) | - | - | - | 70/100 |
Ability to Raise Wages | 48/100 | 51/100 | 41/100 | 67/100 |
U.S. Economy Overall | 60/100 | 65/100 | 62/100 | 63/100 |
Do Demographics Influence Confidence?
Business Size
Business owners expressed optimism in overall business outlook and ability to raise wages – with all three sizes of business groups landing positively on the confident side and two of three seeing modest to massive gains. The 1-19 employee group reported the largest increase with a 27-point spike in ability to raise wages (66/100).
The middle size of the groups – 20-99 employees – expressed more optimism in six categories than the other two businesses size groups (1-19 EEs and 100-500 EEs), including many mid- to high-80s point totals, in categories that emphasized a focus on their own business. Whether it was ability to retain employees (86/100) or ability to find customers (83/100), the 20-99 EE group led the way. Similarly, the 1-19 EE group closed the gap with the 100-500 EE group significantly in most categories.
The only two categories in which the largest business size surpassed the others was confidence in U.S. economy overall (80/100), where a five-point increase was its biggest jump in any of the nine categories, and ability to raise wages. In the latter, the 100-500 EE group dropped two points from the Spring 2019 report, finishing with an 80/100.
Item | 1-19 Employees |
20-99 Employees |
100-500 Employees |
---|---|---|---|
Ability to Retain Employees | 78/100 | 86/100 | 84/100 |
Access to Capital | 76/100 | 82/100 | 82/100 |
Ability to find New Customers | 73/100 | 83/100 | 80/100 |
Overall Business Outlook | 73/100 | 83/100 | 80/100 |
Ability to Make Capital Investments | 74/100 | 83/100 | 80/100 |
Ability to Fill Open Positions with Qualified Candidates | 72/100 | 80/100 | 79/100 |
Ability to Withstand an Economic Recession | 70/100 | 81/100 | 78/100 |
Ability to Raise Wages | 66/100 | 79/100 | 80/100 |
U.S. Economy Overall | 63/100 | 73/100 | 80/100 |
Geography
The West (73/100) and Northeast (72/100) business owners did not express as much confidence as the South (76/100) in overall business outlook, but they did make big jumps from the Spring 2019 report, with increases of 17 points and 13 points, respectively.
In the ability to raise wages, every region saw a major increase from the Spring 2019 report, including a 31-point hike in the South and a 22-point hike in the Midwest, which resulted in every region moving to more optimistic than pessimistic in this category.
Business owners in the Midwest expressed the most optimism (70/100) among regions, but it was a 15-point spike in the West (65/100) that moved them clearly toward more optimistic.
“(I’m as) confident as I have been since I opened the door to my business in 1991,” said one survey respondent.
Item | West | Midwest | South | Northeast |
---|---|---|---|---|
Ability to Retain Employees | 78/100 | 80/100 | 78/100 | 79/100 |
Access to Capital | 81/100 | 75/100 | 78/100 | 72/100 |
Ability to find New Customers | 75/100 | 67/100 | 78/100 | 72/100 |
Overall Business Outlook | 73/100 | 71/100 | 76/100 | 72/100 |
Ability to Make Capital Investments | 79/100 | 69/100 | 76/100 | 71/00 |
Ability to Fill Open Positions with Qualified Candidates | 80/100 | 68/100 | 75/100 | 72/100 |
Ability to Withstand an Economic Recession | 73/100 | 70/100 | 71/100 | 67/100 |
Ability to Raise Wages | 66/100 | 54/100 | 72/100 | 64/100 |
U.S. Economy Overall | 65/100 | 70/100 | 64/100 | 54/100 |
Population Density
All three areas remained confident in the U.S. economy, with the rural population expressing the greatest optimism along with seeing the most gain from the Spring 2019 report – plus 6. Even the urban population saw gains (+3), while suburban areas remained unchanged, but still optimistic (62/100).
Item | Rural | Suburban | Urban |
---|---|---|---|
Ability to Retain Employees | 79/100 | 76/100 | 80/100 |
Access to Capital | 78/100 | 71/100 | 78/100 |
Ability to find New Customers | 76/100 | 72/100 | 74/100 |
Overall Business Outlook | 75/100 | 71/100 | 73/100 |
Ability to Make Capital Investments | 78/100 | 70/100 | 76/100 |
Ability to Fill Open Positions with Qualified Candidates Recession | 72/100 | 72/100 | 75/100 |
Ability to Withstand an Economic Recession | 75/100 | 67/100 | 73/100 |
Ability to Raise Wages | 65/100 | 67/100 | 67/100 |
U.S. Economy Overall | 69/100 | 62/100 | 58/100 |
Industry
For the fourth straight report, manufacturing expressed the most optimism about the U.S. economy, despite dropping three points. Professional Services also saw a slightly bigger dip – seven points – from Spring 2019, while Retail/Wholesale and Other each saw upticks of three points overall. All four sectors also expressed overwhelming confidence in the ability to retain employees, each topping 75 points with Manufacturing leading the way (84/100). Each sector saw modest gains from the previous report in overall business outlook, with the biggest gain coming in Professional Services (+10).
Item | Professional Services |
Retail/ Wholesale |
Manufacturing | Other |
---|---|---|---|---|
Ability to Retain Employees | 78/100 | 77/100 | 84/100 | 77/100 |
Access to Capital | 78/100 | 75/100 | 82/100 | 80/100 |
Ability to Find New Customers | 71/100 | 76/100 | 75/100 | 78/100 |
Overall Business Outlook | 71/100 | 73/100 | 72/100 | 74/100 |
Ability to Make Capital Investments | 74/100 | 73/100 | 78/100 | 72/100 |
Ability to Fill Open Positions with Qualified Candidates | 69/100 | 75/100 | 74/100 | 71/100 |
Ability to Withstand an Economic Recession | 70/100 | 70/100 | 71/100 | 71/100 |
Ability to Raise Wages | 69/100 | 61/100 | 70/100 | 71/100 |
U.S. Economy | 55/100 | 65/100 | 69/100 | 54/100 |
Owner Age
Younger business owners’ confidence level in most categories is on par with owners who could be three times their age (18 and 55), and in some areas – ability to find new customers (78/100), ability to make capital investments (79/100), ability to withstand a recession (75/100), and ability to raise wages (75/100) – have a little to significantly more optimism than older businesses owners. This could be explained by understanding and adopting new technologies to attract customers, or in the fact that older owners nearing retirement might be less apt to risk spending money on expansion in favor of more savings.
“I feel as though we, as a company, can weather almost anything because we have made a point to be able to do that effectively,” said one business owner in response to the company’s ability to withstand an economic recession.
However, older business owners (55 and older) have more confidence in the U.S. economy than younger owners (65/100 compared to 59/100).
Item | 18-38 | 39-54 | 55+ |
---|---|---|---|
Ability to Retain Employees | 75/100 | 81/100 | 78/100 |
Access to Capital | 71/100 | 75/100 | 79/100 |
Ability to Find New Customers | 78/100 | 76/100 | 73/100 |
Overall Business Outlook | 72/100 | 73/100 | 73/100 |
Ability to Make Capital Investments | 79/100 | 70/100 | 76/100 |
Ability to Fill Open Positions with Qualified Candidates | 72/100 | 77/100 | 72/100 |
Ability to Withstand an Economic Recession | 75/100 | 66/100 | 71/100 |
Ability to Raise Wages | 75/100 | 66/100 | 64/100 |
U.S. Economy | 59/100 | 54/100 | 65/100 |
Company Age
New companies (less than 2 years) expressed similar confidence as more established businesses in their ability to find customers and fill open positions with qualified candidates. And when it came to looking at their overall business outlook, those companies showed the highest gains from the Spring report – a plus 25 to land first among the four groups with 78/100.
And although new businesses saw modest gains in their ability to retain employees and access capital, the more established businesses expressed far more confidence, including a 30-point gain from businesses 10- to 19-years-old in retaining employees. This group also saw the biggest gain (+18) in their confidence in accessing capital.
Another business owner noted why the company had such an optimistic view on the overall business outlook. “I’m a single business owner with no employees. I have more than enough money saved to weather any problems. I only have to deal with getting new customers for my services and nothing else.”
Where newer companies had far less optimism were in their abilities to withstand an economic recession – lagging 15 points behind the nearest group (20+ years) – and in the U.S. economy. In fact, businesses with less than two years’ experience dropped 17 points from Spring 2019, resulting in that group being the only of the four to have a pessimistic outlook (43/100). Companies 10-19 years in recognized the largest gain (+17) and the greatest confidence (68/100).
Item | <2 years | 2-9 years | 10-19 years | 20+ years |
---|---|---|---|---|
Ability to Retain Employees | 68/100 | 79/100 | 81/100 | 78/100 |
Access to Capital | 60/100 | 78/100 | 79/100 | 76/100 |
Ability to Find New Customers | 72/100 | 78/100 | 73/100 | 71/100 |
Overall Business Outlook | 78/100 | 74/100 | 73/100 | 71/100 |
Ability to Make Capital Investments | 74/100 | 74/100 | 75/100 | 73/100 |
Ability to Fill Open Positions with Qualified Candidates | 72/100 | 72/100 | 75/100 | 68/100 |
Ability to Withstand an Economic Recession | 51/100 | 75/100 | 70/100 | 66/100 |
Ability to Raise Wages | 65/100 | 66/100 | 69/100 | 67/100 |
U.S. Economy | 43/100 | 60/100 | 68/100 | 64/100 |
Owner Gender
Men and women expressed similar confidence in many categories, with the difference in overall points usually about seven and never more than 10. Most notably was the 21-point gain in optimism by women in their ability to access capital, whereas the men saw a minor gain of seven. Both men- and women-owned businesses saw slight gains of four points each in optimism about the U.S. economy and similar showings in overall business outlook – seven- and nine-point bumps, respectively, from the Spring report.
Item | Male | Female |
---|---|---|
Ability to Retain Employees | 81/100 | 75/100 |
Access to Capital | 80/100 | 73/100 |
Ability to Find New Customers | 75/100 | 73/100 |
Overall Business Outlook | 75/100 | 70/100 |
Ability to Make Capital Investments | 79/100 | 69/100 |
Ability to Fill Open Positions with Qualified Candidates | 75/100 | 71/100 |
Ability to Withstand an Economic Recession | 73/100 | 65/100 |
Ability to Raise Wages | 70/100 | 63/100 |
U.S. Economy | 68/100 | 59/100 |
Company revenue
No matter their revenue, businesses expressed nearly overwhelming confidence in every category, with the total amount of revenue seemingly determining how much confidence. Businesses with $5 million-plus in revenue scored in the 80s in every category, including confidence in the U.S. economy, where an 81/100 was 21 points higher than businesses with less than $500,000 in revenue.
Item | <$500K | $500K to $900K |
$1M to $4.9M |
$5M+ |
---|---|---|---|---|
Ability to Retain Employees | 75/100 | 87/100 | 84/100 | 86/100 |
Access to Capital | 70/100 | 80/100 | 82/100 | 88/100 |
Ability to Find New Customers | 72/100 | 82/100 | 78/100 | 83/100 |
Overall Business Outlook | 72/100 | 79/100 | 79/100 | 82/100 |
Ability to Make Capital Investments | 70/100 | 79/100 | 80/100 | 84/100 |
Ability to Fill Open Positions with Qualified Candidates | 68/100 | 79/100 | 79/100 | 81/100 |
Ability to Withstand an Economic Recession | 70/100 | 75/100 | 78/100 | 83/100 |
Ability to Raise Wages | 64/100 | 74/100 | 76/100 | 83/100 |
U.S. Economy | 60/100 | 73/100 | 72/100 | 81/100 |
Top Business Challenges
Companies are faced with ever-increasing regulatory obligations from the federal, state, and local levels, yet fewer than one-fifth in every category deemed the issues “very challenging,” with healthcare topping the list at 20% and complying with federal employment regulations (14%) next. Managing HR seemed to be where they were most comfortable, with 53% stating that those tasks were “not challenging at all.”
Geography
The data seem to reveal that the region one does business in doesn’t have a significant effect on how challenging it is to handle issues. Of note: 26% of business owners in the Midwest determined that managing healthcare reform was “very challenging,” twice as much as in the South. Additionally, only 4% of business owners in the Midwest thought managing independent contractors/freelancers, etc., was “very challenging” whereas, percentage-wise, more than twice as many thought so in the West, three times as many in the South, and nearly four times as many in the Northeast.
Business Size
The bigger the business, the more challenging handling the issues becomes, according to respondents. In very few categories did “very challenging” not top 40 percent for the 100-500 employee group, including the 53% who expressed that about “complying with state employment regulations.”
“I am a little worried about growth in my business area due to the new laws,” responded one business owner.
Other notable points were in the 20-99 employee size, with most of the percentages for the three responses – very challenging, somewhat challenging, and not at all challenging – hovering near one-third for each issue. Several exceptions included the 49% who said that complying with state employment regulations was “somewhat challenging” and the 51% who indicated that managing HR overall is “somewhat challenging.”
Population Density
Maybe things are less complex out in the country, at least as far as handling business challenges, according to the data from this most-recent report. Businesses in rural areas responded that the challenges were “not at all challenging,” with only one issue – managing healthcare reform – creeping above 10% for “very challenging.” From the responses, businesses challenges got more difficult as the population density increased.
Industry
In all but two categories, manufacturing found these issues to be “very challenging” as compared with the other industry sectors. Managing wage legislation (minimum wage laws, overtime rules, etc.) and managing mandatory paid sick leave laws/paid family leave laws demonstrated considerable differences from the other sectors – with 21% in Manufacturing listing both issues as “very challenging”, which was more than twice and in some instances three times more than the other industries.
Owner Age
Owners who were older than 55 found most of the issues less challenging than younger business owners. For example, only 5% of owners 55 and older found managing HR “very challenging” compared to the 13% of business owners age 18-38. Additionally, nearly three-quarters (72%) of owners 18-38 found managing healthcare reform at least somewhat “challenging” compared to the less than half (49%) of owners 55-plus, while almost one-fifth of the youngest owners listed managing independent contractors/freelancers/gig workers as “very challenging” while only 11% of owners 39-54 and even fewer (8%) of the oldest owners found that to be the case.
Company Age
Being established can have many perks, and these responses demonstrate that. Nearly across the board, the more established the company, the less challenging each of these issues are. Notable were the breakdowns from the managing mandatory paid sick leave laws/paid family leave laws category, in which only 4% of the 2-9 years in business group listed this as “very challenging” while 40% named it as “somewhat challenging.” Both these percentages were the lowest and highest among the groups for this issue, but the overall 44% who found it “challenging” was in-line with the other three groups (39% for less than 2 years, 42% for 10-19 years, and 38% for 20-plus years).
Owner Gender
There were very minor differences between genders among the answers in each category, with the most notable being the 11% difference between females (8%) and males (19%) who found it “very challenging” when navigating the overall regulatory environment.
Company Revenue
More money, more employees, more regulations – and the converse seems to hold true for businesses with less revenue. For example, 21% of businesses with less than $500,000 in revenue found managing healthcare reform “very challenging” as compared to the other groups with percentages 30% or higher, including 35% for $1 million to $4.9 million in revenue businesses. Consider now that these businesses with larger revenues might have more than 50 people they employ, making them Applicable Large Employers (ALEs) who are subject to the Employer Shared Responsibility (ESR) provision of the Affordable Care Act. That means more forms to file and regulations they must comply with to avoid potential fines from the Internal Revenue Service.
Similarly, 69% of businesses with revenues of more than $5 million listed managing wage legislation as at least somewhat “challenging” as compared to 50% in the lowest revenue bracket from the report.
About the Paychex Business Sentiment Report
Data included in this Paychex Business Sentiment Report was taken from the results of the Paychex Business Survey, administered by Bredin, a third-party research firm. This survey was conducted online between Aug. 1, 2019 and Aug. 13, 2019 and polled 500 randomly selected principals of U.S. companies with 1-500 employees. Results are representative of how small business owners feel, on a scale of 1 to 100 with 1 representing the highest level of pessimism and 100 representing the highest level of optimism. The margin of error for this study was +/- 4%. This is the fourth installment of the Paychex Business Sentiment Report. The previous three reports were released in summer 2018, fall 2018, and spring 2019.
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