Small Business Optimism Explodes to Highest Levels in Decades

Small Business Optimism Explodes to Its Highest Level in Decades as Trump Takes Reins

One of the most respected barometers of business confidence has determined that optimism soared to unprecedented levels in December of 2016 based on Donald Trump’s election and his pro-business agenda. Expectations for growth are the highest that they’ve been since late 2004. The NFIB gauge jumped 7.4 points, and seven out the 10 criteria were viewed favorably by a coalition of small business owners according to a report posted at Bloomberg.com.

Donald Trump’s plans to spur business are credited with the upsurge in business confidence. Breitbart.com reports that the National Federation of Independent Business reported a surge of confidence in November of 2016, which jumped even further in December as Inauguration Day approached. NFIB Chief Economist Bill Dunkelberg commented on the trend, “The November index was basically unchanged from October’s reading up to the point of the election and then rose dramatically after the results of the election were known.”

The boost came as a direct result of Trump’s plans to deregulate the financial industry, reform the tax code and invest in infrastructure. Business owners expect better conditions for business by a margin that has soared 44 percent. Before the election, confidence was at negative six percent. Dunkelberg continued his analysis, “Even without separating the data, the November results paint a starkly different picture than what we’ve seen in the last 94 months.” Trump’s agenda and a unified Republican government are expected to favor business development while eliminating burdensome regulations.

The NFIB, or National Federation of Independent Businesses, conducts a monthly assessment of the U.S. economy and business confidence from data supplied by its members. The Small Business Economic Trends, or SBET, first appeared in October of 1973, and the survey has proved to be a reliable benchmark of small business optimism. The 10 indicators that the SBET measures include:

  1. Whether it’s a good time to expand
  2. Assessment of the general economic outlook
  3. Expected sales
  4. Current economic earnings
  5. Projected capital outlays
  6. Estimated job openings
  7. Hiring plans
  8. Inventory information
  9. Anticipated changes in inventory
  10. Credit conditions

The survey found positive outlooks for seven of these criteria. The overall confidence level was the highest it’s been in recent times.

Global Financial Markets Express Optimism as Trump Assumes His Presidency

The primary reasons for this increased optimism are based on Trump’s stated agenda of stimulating the economy through tax cuts and reform, deregulating the financial industry and investing in rebuilding the nation’s infrastructure.

Optimism doesn’t just reflect current conditions; it can produce real-world benefits. The Bloomberg article quoted Jim O’Sullivan, chief U.S. economist at High Frequency Economics of Valhalla, New York: “Rising confidence adds to the economy’s upward momentum.” However, Sullivan warns that “NFIB membership appears to be disproportionately Republican, so it is possible that the data will start overstating strength, opposite the pattern during the Obama administration.” Obama often championed reduced expectations according to political critics.

The NFIB report was based on the responses of 619 business owners, and 50 percent of the respondents revealed that they expected business conditions to improve over the next six months. The survey was conducted through December 28, 2016.

Trump Wants to Deregulate Banks and Lenders

Heavier regulation of banks and lenders has been implemented through the Dodd-Frank Act, which created the Consumer Financial Protection Bureau, or CFPB. The agency was created to regulate the financial industry more closely in the wake of the many abuses that helped to generate the financial crisis and recession of 2008-2009. A Money.cnn.com report suggests that banks have been particularly hard hit by the costs of fulfilling tough new regulations. Many banks have been forced to merge to survive the lower interest rates, fines and increased costs of offering personal loans.

The CEO of Bancorp of New Jersey, Nancy Graves, commented, “Much of the cause of the recession did not have to do with community banks. For us to be painted with the same regulatory brush is unfair.” Dodd-Frank regulates larger banks even more closely, but President Trump campaigned on deregulating the industry and relying on free enterprise and competition to regulate banking. The technique works fine for most businesses, and competitive alternative lending strategies are already igniting increases in online personal loans.

CNBC.com reports that bank stocks have been rising steadily since Trump’s election in November of 2016. Banks have been wary about expanding credit under the old regulations, so banks now have an excess of cash to loan. The Federal Reserve now holds $1.9 trillion in excess cash reserves. Trump has vowed to ease financial regulations and drastically change the CFPB or abolish it completely.

The bureau has drawn intense criticism for exceeding its legislative mandate, concentrating too much power in the agency’s director and operating independently of the traditional checks and balances of government. Trump is said to favor a committee approach where decisions are made by consensus.

Entrepreneurs Believe Trump Will Succeed at Rolling Back Regulations

Entrpreneurs and business owners from all geographic areas and industries are more confident because they recognize a kindred spirit in Trump according to a report at Northjersey.com. This business coalition believes that Trump can deliver on his promises to reduce regulations and lower business taxes. Realistically, most owners don’t expect instant results. A Wells Fargo survey found that 46 percent of those surveyed expected conditions to improve next year, which compared to 30 percent in a survey conducted one year ago.

Entrepreneurs are more confident in consumer buying habits as well. Most business owners feel that consumers now have to confidence to buy nonessential items that they’ve been putting off for many years now. Kurt Steckel, CEO of Bison Analytics, commented on Trump’s election: “The election does give me more optimism than I would have had otherwise.” Steckel has experienced increased business inquiries from clients looking to expand. Among the laws that business owners would like to rescind or weaken are the overtime regulations of the Department of Labor.

Trump’s appointment of Andy Puzder as Labor Secretary sends a strong message that the agency will relax its overtime rules. Pudzer is known to oppose the regulations, and he has vowed to initiate a rollback of Obama Administration regulations. Business owners are particularly concerned about multiple minimum wage laws from state, local and federal governments. Companies are forced to deal with conflicting regulations and employment laws, which can be time-consuming, annoying and confusing. Business owners want greater standardization at minimal levels of regulation.

Politics and world events can rapidly change market trends and business confidence. Stay tuned for further information about the economy, financial regulation and the incoming administration’s efforts for financial reform. You can find out more about business optimism and the economy at the Personal Money Store.

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