Main Street remains cautiously optimistic about the US economy

Small business owners who think the economy will be better in six months outpaced those who said it would be 20 percentage points worse, according to a survey by the National Federation of Independent Businesses in July. The group regularly interviews business leaders throughout the year.

That’s a better read than at the start of this year, but it is well below the readings of 2017 and 2018, when “best conditions” exceeded “worst conditions” by 30 to 48 percentage points.

Small businesses adding jobs topped job cuts by 2.6 percentage points, according to the survey. But it’s also down sharply from readings in the previous five quarters, when those adding jobs topped those removing jobs by 4.8 to 7.3 percentage points. Business owners cited the availability of qualified candidates as their biggest problem. This is not surprising: with unemployment at a historic low, it is a job seekers market.

The NFIB surveyed 1,500 small business owners. The survey dates back to 1973, and the results can sometimes be a good early warning system for an economic downturn.

“Small entrepreneurs are at the end of the supply chain. If it is a consumer-driven recession, small businesses are the first to know, ”said William Dunkelberg, NFIB chief economist.

Before the onset of the Great Recession at the end of 2007, the survey showed that more respondents expected the economy to be worse six months into the future than to be better. And they turned sharply bearish in early 2008, when many economists were still wondering if the recession had started.

But the small business owners surveyed sometimes missed seeing a recession coming – or, more often, were too bearish. From 2011 to the end of 2016, the survey showed that more small business owners expected a worse economy than the other way around, even though growth remained slow but stable throughout this period.