A Small Business Recession: Fact or Fiction?

Are we heading into a small business recession? This week we noticed a few publications suggesting there is a decline in the state of small businesses. The official stats seem to match what we’ve seen in our newsfeed.  The labor participation rate now stands at 62.6 percent — a 38 year low. Economists anticipated 162,000 jobs to be created that means that’s a 75% over-projection, with only 38,000 jobs having been created in the month of May.

Some sources proclaimed that the US Economy has headed into a small business recession. This was notably suggested by former McDonald’s CEO Ed Rensi to MSNBC’S “Closing Bell”.  He noted, in his interview on the cable network, “if we don’t start opening up the opportunity for entrepreneurs to grow their business, we’re going to continue see this drop in jobs.”

He blamed the so-called small business recession on taxation, regulations and minimum wage increases, among others. This is ringing a different tune from expectations earlier in the year. Heck, these numbers even conflict with what experts expected in April.  The former CEO-turned-small-business-owner Retsi obviously is not too optimistic about the future. His opinions however, seem to conflict with other newly published reports from entrepreneurs. What happened to the positive expectation for small business owners in 2016? 

The State of Small Business Report created by Wasp Barcode Technologies, surveyed 1,102 owners or managers of companies in December 2015, there seemed to be a higher level of optimism. 71% of the entrepreneurs they surveyed expected growth in 2016. Only 25% of those surveyed had pessimistic views of business growth.

Around the same time as the Wasp Report a popular insurance company was surveying business owners and received similar results. The information was consistent: no indicator of a coming small business recession.

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The Small Business Barometer measures everything from optimism to customers on a scale of challenged to excellent.

Allstate, you know the “you’re in good hands” insurance company, debuted their Small Business Barometer. The barometer displays data from interviews with more than 2,500 business operators. Allstate collected stats from 25 major cities and organized them into dozens of comprehensive charts, filled with colors and everything. It… is… awesome, but I digress.

The barometer measures everything from optimism to customers on a scale of challenged to excellent. Overall the business owners surveyed seem to think that things are going quite well. Or maybe the kinds of business owners who have time to take Allstate surveys are having a different experience from that of the average entrepreneur. With the new statistics, it appears that a good number of entrepreneurs are looking for ways to keep their business afloat.

Obviously, as we saw in 2008 financial and other circumstance can change overnight. At Silver Rock Funding we know this very well. We hear from thousands of entrepreneurs monthly that need funding. Although not all funding is for those who are on the verge of failure, a large chunk of applicants need money to make payroll or for emergency expenses.

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