Street Businesses Face Uncertain Future with Recent Alterations
In the nation's capital, the new administration is causing quite a commotion, leaving everyone scrambling to keep pace. The Commander-in-Chief is frequently meddling in others' affairs, hunting for funds misappropriated in the system's depths. This has sent shivers down the spines of business owners, anxious about the repercussions of these policy whirlwinds on their business sector and the economy as a whole.
For small-scale business owners, pressing worries include labor quality, inflation, and taxes. In February, approximately one-fifth complained about workforce quality, while sixteen percent pointed to inflation, and the same percentage cited taxes as their greatest concern. Maintaining the Tax Cuts and Jobs Act (TCJA) provisions set to expire in 2025 would lighten the burden of the looming tax increase on small businesses, providing a breath of relief. Inflation woes stem from a 20% overall increase in consumer price index (CPI) since 2021; this uptick hasn't shown signs of receding yet, leaving prices elevated. In the same month, around 89% of businesses seeking employees reported a lack of qualified applicants for open positions. A staggering 19% identified labor quality as their primary hurdle in operating their businesses.
The spirits of consumers seem to be dampened by this uncertainty. The University of Michigan's Index of Consumer Sentiment has witnessed a decline, dropping from 70.5 to 64.7 between last October and February 2025. The young demographic (ages 18 to 35) has experienced a setback, sliding from 75.5 in October of the previous year to 71.2 in January. Politics have a bearing, with Democrats' Index dropping by 40 percentage points between October and January, while the Republicans' Index saw a 33-point increase.
Growth-oriented firms rely on capital investments in infrastructure, equipment, and training to reach their expansion objectives. To make such investments, business owners must feel confident that their plans will bear fruit. Uncertainty inhibits this confidence, as it signifies the inability to provide a directional forecast (e.g., higher/lower, faster/slower, etc.). When owners remain uncertain, they are hesitant to make decisions that fuel (or hinder) growth.
The National Federation of Independent Business (NFIB) has surveyed around 300,000 companies since 1973, posing forward-looking questions about plans and backward-looking questions about past decisions. The NFIB Uncertainty Index depends on the percentage of small business owners who respond with "I don't know" or "uncertain" to the following six questions:
- Are the next three months expected to be a favorable time for substantial small business expansion?
- Is the overall economy likely to be better six months from now?
- What do you anticipate for the volume of goods and services sold during the next three months?
- Are hiring plans for the next three months inclined to expand or decrease the workforce?
- Will it be easier or harder to secure financing in the next three months?
- Plans for capital expenditures in the next three to six months?
Not being able to provide a directional response to these questions reveals the paralysis of uncertainty. The maximum score for the Uncertainty Index with six questions is 120. Historically, the index has been notably high since 2016, except for brief windows after the Covid shutdown when consumers exhibited greater optimism about growth and policy. The 2024 election reintroduced a wave of uncertainty.
Small business owners nationwide must devise strategies for prosperous growth. To do so, they need clarity and certainty. The government can expedite this process by swiftly implementing its policies. But for now, the landscape remains murky, casting a shadow over the confidence of small business owners and their plans for the future.
- Small business owners, concerned about labor quality, inflation, and taxes, are hoping the administration will maintain the Tax Cuts and Jobs Act (TCJA) provisions to alleviate the burden of an incoming tax increase.
- Inflation, with a 20% overall increase in the consumer price index (CPI) since 2021, and uncertainty in the economy are dampening the spirits of consumers, as indicated by the decline in the University of Michigan's Index of Consumer Sentiment.
- Uncertainty, as measured by the National Federation of Independent Business (NFIB) Uncertainty Index, remains high for small business owners, inhibiting them from making decisions that fuel growth due to the inability to provide a directional forecast for their plans and investments.
