Small-business optimism is on the rise following Donald Trump’s election victory, suggesting a potential boost in hiring intentions.
Small-business owners, typically leaning Republican, are anticipated to feel more optimistic with Trump promising tax and regulation cuts after his recent election win. Historically, such optimism has led to increased hiring intentions, as evidenced following the 2016 election. Despite the National Bureau of Economic Research not declaring an official recession in recent years, factors like inflation and a struggling job market have cast a shadow over consumer sentiment. However, the recent election could shift this perspective.
In the past, small business optimism surged post-election, with plans to hire more employees becoming prevalent. Oliver Allen, senior US economist at Pantheon Macroeconomics, noted a substantial shift in such optimism after the 2016 election. With higher interest rates currently in play, experts still predict a positive outlook boost. David Kostin from Goldman Sachs highlighted that after Trump’s 2016 election, the National Federation of Independent Businesses’ optimism index skyrocketed, reflecting a revival of ‘animal spirits’. They expect a similar trend now, potentially improving the spending environment for small businesses in 2025, enhancing earnings and stock valuations tied to such spending.
Admir Kolaj from TD Economics shares this sentiment, anticipating an improved mood among small business owners towards the year’s end. Historical data from the National Federation of Independent Businesses indicate that post-election periods often see optimism translating into concrete hiring actions. Although job openings were rising before 2016 and are falling now, the optimism boost might reverse this trend.
The current economic climate, with cooling inflation and falling interest rates, could lead to increased job availability, improving consumer confidence and potentially wages. More job openings would create an employee-friendly market, allowing workers to seek better opportunities, reducing feelings of being ‘stuck’ as noted by Daniel Zhao, lead economist at Glassdoor. Zhao warns of a possible ‘wave of revenge quitting’ as job options expand.
Challenges remain, such as increasing unemployment and a tough credit environment for small businesses, which may persist. Uncertainty from tariff proposals further complicates the outlook. Yet, the possibility of improved labor conditions driven by optimistic small business owners is deemed plausible, backed by historical data. The actual impact on hiring and consumer attitudes will become clearer in the coming months.
The potential for a rise in small-business optimism leading to improved labor market conditions is noteworthy. While challenges exist, past trends suggest a positive outlook may spur hiring and enhance consumer sentiment. The full effects will unfold over time, offering insight into whether such optimism can indeed bolster the economy.
Source: BusinessInsider
