Small Businesses Love Trump
The National Federation of Independent Business (NFIB) Research Foundation has been conducting surveys on small business economic trends since 1973. One of the primary indicators that the organization tracks is the Index of Small Business Optimism. This index gives investors and economy observes insights into the current state of small businesses. This is especially important in the U.S. as small businesses employee 90% of the workforce and account for close to 50% of nonfarm GDP.
In January, the Small Business Optimism index rose to 105.9, the highest level since December 2004.
NFIB
This increase in the index was caused by increases in job openings and job creation plans. This confirms the massive increase in the index that has occurred in December 2016 following President Trump’s election in November. Trump’s message of less regulations and lower taxes is clearly resonating with small businesses. The positive expectations that the index measured are expected to manifest themselves in increased spending and hiring.
Reagan Era Comparison?
In addition to the optimism survey the research group’s report also highlights that:
“… the postelection surge in optimism looks much like the surge in 1983 which was followed by seven years of GDP growth averaging 4.5 percent.”
Despite this similarity, the NFIB’s economist believes that growth under Trump will be somewhat subdued to the lack of investment in capacity that small businesses made during the Obama administration. One counter argument to the NFIB’s economist is that there is a significant amount of underemployed or people who have left the labor force.
Government Statistics at Odds with Mainstream Media Talk Track
The report also highlights the difference between the mainstream media narrative and reality. Mainstream media claims that Trump inherited a strong economy. This is in conflict with most small business owners who haven’t experienced a “strong economy” since the mid 2000’s.
“Although many economists claim that President Trump is inheriting a ‘strong economy’, government statistics beg to differ. GDP grew only 1.9 percent in the fourth quarter of 2016 and an average of 1.6 percent for the entire year. This is the result of eight years of poor economic policies and gridlock in Congress. Congress now has the opportunity to undo harmful, anti-growth policies.”
Executive Order Reducing Regulation
On January 30th President Trump signed an important executive order to help small businesses thrive. The “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs” requires that for every one new regulation issued, at least two prior regulations be identified for elimination. The executive order is an elegant way of reducing bloated regulations. It also helps offset some of the damage that occurred during the Obama administration.
The impact to small businesses of this regulation will not be immediate but it is nevertheless important. Due to their size, small businesses are most sensitive to regulatory costs. According to NFIB since 2009 “government requirements and red tape” is a top-three problem for small businesses. It is very difficult for small businesses to keep up with the growing level of regulation. Small business owners are responsible for enough all ready to be expected to keep up with the Washington bureaucrats.
Next 4 Years
In conclusion, the next four years under President Trump will be very positive for small business owners. President Trump recognizes the important role that small businesses plan and the impact that bureaucrats can have on economic growth. All things being equal Trump’s policies should help stimulate the economy. It will be interesting to see how the mainstream media covers the economy over the next four years. In Boom Bust Market’s inauguration report from mid January we highlighted to readers that,
“Investors should seek out opportunities that can benefit from increased small business growth”.
We believe that Trump will be very positive for small businesses. The results of this recent optimism survey confirm that small businesses feel the same.
Originally Posted on Boom Bust Market.