- Confidence has economic ripple effects
- Small business optimism correlates to higher intentions to hire and give raises
- Check out optimism and hiring intent for local merchants in 20 major U.S. cities
As a general rule, confidence has a significant impact on the economy. When consumers feel good, they spend more. And when they spend more, the economy does better.
The same is true for America’s 28 million small businesses, which drive tremendous economic value as the source of half of U.S. sales and employment. According to Womply’s research, small business owner optimism correlates strongly to actions that improve the economy, like hiring and expansion. In fact, our recent national small business sentiment study found that optimistic owners are 3.5x more likely to hire and give raises whereas pessimistic ones are 6.5x more likely to reduce staff and employee pay.
As part of our study, we found pervasive optimism in states like Kansas, Missouri, Utah, Indiana, and Georgia, where the local economies are humming along. But what about the city level? In major U.S. metros like New York City, where the gross metropolitan product (GMP) is measured in trillions, even modest fluctuations can bring about big changes — for better or for worse.
We analyzed data on small business optimism and hiring intent for 20 major U.S. cities — some very large ones and others in the middle market — including New York, L.A., Chicago, Atlanta, Miami, and Dallas. We looked at how many optimistic merchants those cities had in relation to pessimistic ones, and how many owners plan to add staff this year. Here’s what we found:
A few observations:
- Portland, Oregon, is a terrific example of the correlation between optimism and hiring intent, leading the pack in both categories.
- Houston, Texas, on the other hand, defies the trend, with high optimism and very low hiring intent.
- Relatively speaking, the largest U.S. cities are on coming up small in optimism and hiring intent. Chicago (population: 2.7 million), leads the group with a 3-to-1 ratio of optimists to pessimists, New York (8.6 million), is next at 2-to-1, and Los Angeles (4 million) is split at 1-to-1.
- Hiring intention generally falls between 20-30% for local businesses in major American metros.
- Time to boost spirits in Sacramento. It’s the only city on the list with more pessimism than optimism, and its 11% rate of hiring intent is tied with San Francisco as the lowest mark among the 20 cities on our list.
Check out the state profiles on our blog to learn more about confidence levels, top worries, and business policy priorities for small businesses coast to coast.