Vice President, Small Business Policy, U.S. Chamber of Commerce
July 10, 2023
The Latest Forecast
Weather for small business is a sunny, but remarkably unpleasant. It is humid, hot, and sticky with storm clouds on the horizon.
What it means: Small businesses are doing well, especially with wage hikes calming down. That sunny forecast is made unpleasantly humid, hot, and sticky due to high inflation, continued worker shortages, and expected interest rate hikes.
Listen: Tom Sullivan and National Federation of Independent Business (NFIB)'s Holly Wade talk about their small business forecasts on a weekly podcast. Listen here.
Explore key takeaways from the latest small business reports below. The next MetLife & U.S. Chamber Small Business Index release is September 2023.
New Small Business Data
Summary: Wage inflation seems to finally be calming down on Main Street, but finding and hiring qualified and willing workers remains a challenge.
- 42% of small businesses reported job openings they could not fill in June (down 2 points from May and still far above the 49-year average of 23%).
- 59% of small businesses hired or tried to hire in June (down 4 points from May). Of those hiring, 92% of owners reported few or no qualified job applicants (up 3 points from May).
- 15% of small business owners are planning to create new jobs in the next 3-months (down 4 points from May).
- 36% of businesses raised compensation in June (down 5 points from May) and 22% of small business owners plan on raising compensation in the next 3-months (unchanged from May).
Summary: This quarter’s Small Business Index shows the resilience of America’s Main Street employers, with bullish optimism pushing Index higher.
- Index score is 63.1 60 (up 3.1 points from Q1 of this year), with the increase explained by higher growth expectations for the coming year.
- 54% of small business owners rank inflation costs as top concern (6 consecutive quarters at top and unchanged from last Quarter which was the highest percentage in Index’s history).
- 42% of small businesses plan on increasing investment over the next 12-months (up 4 points from last quarter) and 47% of small businesses plan on adding staff (up 10 points from last quarter and highest percentage in 5-years).
- 71% of small businesses plan on increased revenues in the next 12-months (up 7 points from last quarter and a record-high).
- 76% of small businesses report that rising interest rates are limiting their ability to raise capital (up 10 points from last quarter) and 50% report they have delayed their growth plans due to interest rate hikes.
TD Bank’s 2023 Small Business Survey(June 21, 2023)
Summary: Inflation tops the list of concerns, but Main Street employers remain optimistic.
- 62% of small businesses view inflation as their top business concern, with employee retention and hiring listed as a distant second (24%).
- 80% of small businesses voiced optimism about how they will do in the next 12-months, with 17% worried about surviving.
- 70% of small employers are prioritizing staff retention. 26% are focusing on new hires, and 4% are reducing staff.
Summary: Benjamin Glasner’s analysis shows how new business formation remained strong at the end of 2022.
- The national trend, starting in August 2020, of new business creation, persisted and maintained a 5% year-over-year change throughout 2022 (in contrast to business shrinkage from 2018-2019 (growth rate of -2%)).
- In Q4 of 2022 Georgia led the United States with the greatest change in establishments (13.8%), followed by Vermont (10.7%), and Montana and Virginia (10.6%).
- In Q4 of 2022 Nevada led the United States with the greatest change in employment (4.8%), followed by Texas (4.6%) and Florida (4.4%).
Summary: Small businesses continue to be early tech adopters and failure to renew immediate R&D expensing will result in an additional tax hit of 32% averaging $59,000.
- 25% of small business owners are very familiar with immersive technologies (virtual reality, augmented reality, and the metaverse) and 46% of small businesses are somewhat familiar.
- 90% of small businesses utilize cloud computing and the most common applications are cloud backup and web hosting. Over 90% of small businesses are also confident in the security and protection offered by their cloud service providers.
- 29% of small businesses have used immediate research and development expensing (R&D tax credit) and the highest usage is among tech companies (45%).
- 28% of small businesses are surprised that the R&D tax credit is no longer available. 35% of those small businesses that would otherwise utilize the R&D tax credit will have to borrow to pay their taxes and 19% speculate their firm may go out of business.
- 86% of small businesses support the bi-partisan approach to reinstate the R&D tax credit and to make it permanent.
Intuit QuickBooks Small Business Index (June 1, 2023)
Summary: The Index shows a drop in employment, but the broader small business job creation picture remains positive with hiring by small businesses spiking at the end of 2021 due to record-breaking startup growth. Employment in businesses with fewer than 10 employees remains above pre-pandemic levels.
- Overall, small businesses with 1-9 employees shed 20,600 jobs in May. This represents a decrease of -0.16% compared to April and 45,300 fewer jobs than one year ago.
- Sectors that shed the fewest jobs were Agriculture, natural resources and mining (-0.07%), Construction (0.25%), and Education and health services (-0.27%).
- Industries that experienced the largest job declines in May were Wholesale trade (-0.95%), Professional and business services (-0.89%), and Manufacturing (-0.66%).
Explore More Small Business Data
The MetLife & U.S. Chamber of Commerce Small Business Index is released quarterly to deliver a comprehensive quantitative snapshot of the small business sector and explore small business owners’ perspectives on the latest economic and business trends.
About the authors
Thomas M. Sullivan
Thomas M. Sullivan is vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.