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Small Business Economic Trends Heading in the Right Direction

4 min read • Jun 22, 2020 • Derek Miller

The National Federation of Independent Business (NFIB) is the largest small business association in the United States. It frequently releases white papers and reports to help companies understand the state of the economy and current consumer trends. 

The May 2020 Economic Trends report is particularly valuable because it identifies how your customers feel now that states are starting to ease COVID-19 lockdown restrictions. Do people feel safe? Will they support local businesses? Here are a few insights from the report that you need to know. 

Optimism Is Higher Now Than in the Spring

The end of lockdown orders and re-opening of local economies caused the NFIB optimism index to rise 3.5 points in May, reaching 94.4. This increase was a marked improvement from the optimism decline in April. 

Companies as a whole feel that they’ve weathered the worst of the storm after managing to stay afloat these past 2 months. While many small businesses lack a large amount of capital and may have to pay off debts for the next few months, the ability to open their stores and reach customers again provides more promise.

“As the economy reopens, businesses have to rehire workers to take care of new customers,” the NFIB reports. This activity creates a cyclical effect. Rehired workers have an income again, which they can use to stimulate the economy by shopping at various businesses. The increase in customers means even more workers get their jobs back—raising the overall business-owner and consumer confidence levels. 

Factors that contribute to the optimism index include levels of uncertainty amongst business owners, plans for expansion by companies, real estate indexes, earnings trends, and expectations for future sales. In May, 8 out of 10 index components improved while 2 declined. 

Employment Is Still Down

As a whole, the index for the labor market is still weak. The NFIB reports that companies reduced employment by 0.17 workers per firm in the past 3 months, compared to a 0.09 worker decrease in April.This means that a company’s average number of employees has decreased due to the pandemic. 

On the one hand, there are reasons to believe this decrease is a short-term problem and that hiring rates should rise soon. Most employers are eager to have team members back as stores and restaurants reopen. The faster that states transition through reopening phases, the sooner labor numbers could increase. 

On the other hand, there are also reasons to believe these markets won’t rebound immediately—and the numbers may get even worse, despite the lifted stay-at-home orders. Multiple studies have found that between 30–42% of temporarily furloughed jobs are at risk of becoming permanently lost. 

Many of the companies that furloughed employees during the pandemic are going out of business—and the ones that do survive will need to adjust their resources to reduce expenses.

“The pandemic is inflicting a ‘reallocation shock’ in which firms and even entire sectors suffer lasting damage,” a team at Bloomberg News writes. “Lost jobs don’t come back and unemployment stays elevated. That would force workers to retrain or relocate, both of which are hard, and governments to do more than just try to spend their way out of trouble.”

Some industries, cities, and even entire states will likely feel the sting of COVID-19 for years after the pandemic passes, not unlike other natural disasters and crises that sweep through different regions. 

Consumers Saved Their Stimulus Checks

As businesses went into lockdown and closed through March and April, consumers stopped spending and stayed home. With many employees furloughed (even with the introduction of the Paycheck Protection Program, or PPP), more people wanted to stretch their savings and avoid unnecessary spending. 

When the government approved $1,200 stimulus checks for most Americans, they did so with the expectation that consumers would reinvest those checks into the economy. Yes, these checks could be used to help families pay rent and cover other basic expenses, but politicians expected people to spend that money on other goods and services to keep local and global economies afloat.

According to the NFIB, this didn’t happen—mainly because people didn’t have an easy outlet to spend the cash. “Unable to easily spend the money,” they write, “consumers ‘saved’ it (including debt reduction), producing a savings rate of 33%, a historic record.”

Expensive dinners, home-improvement projects, vacations, and major events like weddings are still on hold. While the stimulus money will eventually hit the economy, most people are currently holding onto it, limiting its impact.   

2020 has been an incredibly volatile year because of the COVID-19 pandemic. Most economists are only looking a couple of weeks into the future and approaching estimates with caution. States like Florida and Arizona are already opening up—but they’re also seeing record-high COVID-19 rates

Other governments are considering returning to lockdown to reduce the number of COVID-19 cases. By tracking monthly progress and turning to resources like the NFIB, small business owners can better understand the state of the economy and how their customers feel in the face of these ongoing changes. 


Derek Miller

Derek Miller is the CMO of Smack Apparel, the content guru at, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy,, and StartupCamp.