Where In The Country Are Small Business Owners Most Optimistic?

Where are small business owners the most optimistic these days? NFIB’s Index of Small Business Optimism is proportionately the highest in the East South Central states, where 31 percent of the owners scored 120 or higher on the Index (not seasonally adjusted or based to 1986). Second highest were owners in the Mountain states at 30 percent. Next in line, owners in the West South Central states (25 percent), and South Atlantic states (24 percent). Least optimistic, those with the fewest respondents achieving an Index reading of 120 or more were owners in the Pacific states, followed by owners in the West North Central, and Mid-Atlantic states where only 20 percent scored over 120. 

The single most important business problem for firms in the Pacific states was the cost of regulations, 23 percent, followed by firms in the Mountain states at 16 percent. However, the top concern for the Mountain states was Labor Quality at 26 percent. Taxes were the top issue in the South Atlantic states, 23 percent, and the Mid Atlantic states, 20 percent. Of course, regulations are another form of taxation, telling firms how to spend their revenue instead of using those dollars to reinvest in their business.

Adding the percent citing taxes or regulations as a top problem provides a broader measure of the impact of government. For labor markets, the sum of the percent citing labor cost and labor quality provides a parallel measure of the impact of labor markets on small firms. Owners located in New England and the East Central states least frequently cite taxes or regulations as their top business problem. Labor markets are least problematic in the South Atlantic, East Central, and Mountain states.

           

NFIB calculates an Uncertainty Index, based on the percent of owners who can’t give a definitive answer to six Small Business Economic Trends survey questions (“don’t know”, “uncertain”), such as do you expect business conditions in six months to be better or worse or do you plan to increase or decrease the total number of people working for you. Owners in the Mid-Atlantic states registered the highest incidence of very uncertain owners, 18 percent, followed by 16 percent of owners in the South Atlantic states and the adjoining East South Central states. Least uncertain were owners in the West South Central, New England and Pacific states (they were the most pessimistic and sure of it!), with only 9 percent frequently uncertain about their answers. 

Overall, 23 percent of owners are very optimistic with Index score of 120 or more and 13 percent are very uncertain about the future. The top problem for 30 percent of small business owners are taxes, direct or regulatory related, and 30 percent face labor market issues.

The Covid-19 crisis has exacerbated many of these issues and the decline of federal and state coffers will likely impact small businesses by way of higher taxes post crisis for some time to come.

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