For many, Labor Day is just another excuse to get out of work, school, or other obligations and take a well-deserved day off. It's much more than that. It's a day to recognize the contributions of American workers who've helped forge the world's largest economic force.
Nobody works harder than small business owners. They pull long hours, even by the elevated standards for workaholism in the U.S., and they typically wear many hats. The contributions of small businesses to the local, national, and global economies can't be overstated. As such, Labor Day is a perfect time to take stock of how vital small businesses are in the grand scheme of things.
As you do that, consider that there's never been a better time to run a small business. Certainly, there are threats and challenges, like Amazon's unprecedented consolidation of power in the retail sphere or the rising number of online threats to local businesses. Still, we may look back many years from now and realize we were living in a Golden Age for small business. Here are three reasons why.
1. Optimism is through the roof
The economy runs on psychological fuel as much as anything. When consumers feel good, they spend more and everyone benefits.
The same is true for business owners. Our research found a strong correlation between how optimistic a small business owner is, and how likely he or she is to hire, give employees raises, expand their business, and other actions that drive economic value.
Thankfully, we're enjoying nearly unprecedented optimism among small business owners. The National Federation of Independent Business (NFIB) has been tracking optimism levels on Main Street for quite a while. According to their data, local business owners are enjoying near-record levels of optimism. Take a look:
Our research suggests that optimistic small business owners are 3.5 times more likely to hire staff and give raises, whereas pessimistic owners are 6.5 times more likely to cut staff and wages. Clearly, there's a lot at stake with maintaining positive sentiment on Main Street. At least for now, things couldn't be much better in this regard.
2. The economy is booming
With the woes of the Great Recession completely in the rearview mirror, the U.S. economy has more than rebounded. In fact, the stock market is enjoying historic success, which surprisingly does have an impact on small business owners.
In addition, the economy is cruising along at 30,000 feet according to the most critical measure: gross domestic product (GDP). GDP is basically a measure of economic output — the market value of all the goods and services produced by a region or country. By this metric, the U.S. is also experiencing unprecedented success, with only one negative quarter since 2014. See below:
Some argue that the U.S. is overdue for a recession, but others suggest that the length of time since the last recession isn't a good predictor for the next one. As Annie Lowrey wrote in The Atlantic, "Expansions don't die of old age." So, for now let's keep basking in the warmth of a red-hot economy.
3. Small businesses are winning
It might seem like a paradox, but as technology makes the world more global, we're seeing increased demand for local goods and services.
Food is a good example. In the age of predictable consumer experiences and "on-demand" everything, it would make sense for local food and beverage companies to suffer. Quite the opposite is happening, though. Demand for local food is growing, as is the price consumers are willing to pay for it. The "eat local" movement is impacting national chain restaurants, which are getting their lunch eaten by local eateries.
One possible reason for this renaissance of local is a growing hunger for unique experiences. Research suggests that 80% of Americans believe small businesses put greater emphasis on customer service than larger ones, and as we've written before, public confidence in small businesses is at an all-time high. In fact, Americans are 3x more likely to express confidence in a small business compared to a large one, according to research from Gallup:
It's a great time to be a small business owner. Of course, there are always challenges, but your hard work makes a difference and plenty of trends are working in your favor. So, this Labor Day, reflect on everything that's going right and how bright the future is for you and your business.