The MetLife and U.S. Chamber of Commerce Small Business Index has surged to its highest point since the onset of the COVID-19 pandemic in 2020. Small business owners are increasingly optimistic about the state of the economy, with the Q3 2023 Index score reflecting notable gains. This quarter’s surge is chiefly attributed to a remarkable nine-percentage point rise in the proportion of small enterprises affirming the robust health of the U.S. economy, now standing at 33%. Moreover, small business proprietors are expressing greater confidence in the vitality of their own businesses, with a resounding 66% reporting that their enterprises are in good health, and approximately seven in ten (72%) attesting to their comfort with current cash flow levels. Remarkably, both of these metrics have witnessed an almost 10-point increase since the previous quarter.
Notwithstanding this surge in optimism, inflation remains an inescapable concern for small business owners. For the seventh consecutive quarter, inflation dominates the list of challenges confronting these enterprises. A striking 52% of small businesses cite inflation as their most pressing issue, marking a near-record high that has endured over the past year. In stark contrast, other concerns such as supply chain disruptions, revenue fluctuations, and rising interest rates lag significantly behind, all registering more than a 20-percentage-point deficit when compared to inflation.
While small businesses grapple with inflationary pressures and a challenging economic environment, concerns about employee retention are also beginning to creep into their priorities. Notably, small businesses are experiencing a gradual increase in apprehension regarding employee retention and the affordability of employee benefits. However, in the ongoing battle for talent acquisition, these enterprises perceive unique advantages that set them apart from larger corporations.
In this quarter’s survey, small businesses are twice as likely to identify employee retention as one of their primary challenges compared to two years ago, with 15% acknowledging this concern, as opposed to 7% in Q3 2021. Additionally, a majority of small businesses (56%) are grappling with the challenge of meeting employees’ salary expectations, reflecting the intensifying competition for skilled workers.
Small business leaders are also keenly aware of the distinctive benefits they offer to their employees in a fiercely competitive job market. Approximately nine out of ten (89%) believe that their companies foster a familial atmosphere that aids in employee retention, a notable increase from the 77% reported in Q3 2021. Furthermore, four out of five small businesses (82%) assert that they are uniquely equipped to provide employees with direct access to—and support from—upper management, an advantage that enhances their appeal to job seekers.
As the small business landscape continues to evolve, these findings underscore the resilience and adaptability of small enterprises, who are navigating complex challenges while leveraging their unique strengths to remain competitive in the broader marketplace.