Rising Small Business Optimism Could Forecast Easier Financial Conditions

September 4, 2024

Delaney Sexton
Contributing Editor

Rising Small Business Optimism Could Forecast Easier Financial Conditions

“Small businesses play a disproportionately large role in our labor markets: half the Americans that work for a private business work for a small one. And with entrepreneurship surging since the pandemic, that role is poised to grow further. Americans are finding it an especially good time to start a small business,” says Eric Van Nostrand, Assistant Secretary for Economic Policy at the Department of the Treasury.

The Treasury reviewed the current state of small business and found that small businesses have remained resilient during the economic adversities of recent years. New small businesses are on the rise, small businesses are creating more than 70% of new jobs, and owners are continuing to express confidence in their future business revenue.

Both the NFIB and the U.S. Chamber of Commerce and MetLife indices have seen a boost in small business optimism. Neither index has caught up to pre-pandemic optimism, but they both have seen considerable growth in 2024. The U.S. Treasury notes that increasing small optimism tends to precede easing small business credit conditions by 9 months to a year. Though the two do not have a causal relationship, it is a pattern that could point to bolstering small business lending in the future. There is also a general expectation that financial conditions will become easier.

“Important headwinds remain. Credit for small businesses is still historically tight, although that trend has eased somewhat in recent months. And business owners, like households, still face costs that are too high. But given the recent progress, it is important to recognize the central role small businesses play in the U.S. economy.”

Source:
Department of Treasury Release