The third quarter Small Business Index, produced by the U.S. Chamber of Commerce and MetLife, hit its highest score since the start of the pandemic, as small businesses see an improving economy.
The index, which tracks small business owner confidence, jumped to 69.2 in Q3, up from 63.1 in the previous quarter. That score was buoyed by a nine-percentage point increase in the share of small businesses (33 percent) that say the economy is in good health.
Further, 66 percent of small businesses say their business is in good health while 72 percent say they are comfortable with their cash flow.
“Main Street employers are showing remarkable resiliency in the face of high inflation and a shortage of workers,” Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, said. “With fears of a recession likely in the rearview mirror and inflation starting to ease, small businesses owners are feeling a lot better than they were a year ago.”
Looking at the biggest challenges, about 52 percent of respondent say it is inflation, which has been consistent over the last year. This quarter saw a jump in concern over wage inflation as 56 percent said keeping up with employee salary expectations is a challenge.
There has also been a slow uptick in concern for employee retention and being able to afford employee benefits. About 15 percent of small businesses say employee retention is one of their biggest challenges compared to 7 percent in the same quarter two years ago. The good news is that about 90 percent say their company feels like a family and that has helped them retain employees. Also, 82 percvent agree that small businesses are uniquely qualified to provide employees with connections to—and support from—upper management.
In addition, about 70 percent of small businesses say they are actively addressing employee mental health as a priority right now, up from 60 percent two years ago. Roughly 68 percent report utilizing at least one resource to assist with employee mental health, including encouraging employees to take mental health breaks during work or offering partial or full reimbursement for childcare.
“Employee care is an essential element to an engaged workforce as well as to the success of a small business,” Cynthia Smith, senior vice president, Regional Business at MetLife, said. “It is encouraging to see the majority of small business owners focusing on their employees’ mental health and leveraging available resources. By doing so, they are building an environment that attracts and retains a loyal, more productive workforce.”
The MetLife and U.S. Chamber of Commerce Small Business Index is based on the responses of approximately 750 small business owners and decision makers. It is designed to take the temperature of the sector, see where small business owners are confident, and where they are experiencing challenges.