For most of the nine years after the longest recession to hit the U.S. since World War II, big corporations had the money and resources to withstand the 2008 financial crisis and invest in the aftermath.
In that period, Warren Buffett’s Berkshire Hathaway snapped up Burlington Northern railroad, cable-provider Comcast bought the NBC network, and small businesses struggled to attract both consumers and creditors.
“The world evolves unevenly,” Jim Glassman, head economist for Chase Commercial Bank, told the Washington Examiner. “When the economy starts to get back on its feet, it’s always the big guys that are the first to see it. Smaller businesses hear about things happening but don’t really see it.”
Now, the luck of the little guys is starting to change, with a combination of low unemployment, a GOP-led tax overhaul that slashed business rates to boost the economy, and looser regulation under President Trump’s administration.
Some 62 percent of small companies, those with yearly revenue of $100,000 to $20 million, expect sales to increase this year, according to a January survey by JPMorgan Chase’s commercial unit. More than 80 percent of mid-size businesses, with up to $500 million a year, expect increased sales.
In the latter group, 69 percent are optimistic about the global economy, more than twice as many as last year and the most since the survey began eight years ago, according to JPMorgan. The bank’s findings represent the feedback of 2,640 business leaders contacted in January, 955 of whom represented small companies, with the rest from mid-size firms.
It’s unclear exactly how much of the rising spirits are due to the specific provisions of the new tax law, which reduces the top corporate rate from 35 percent to 21 percent, since smaller businesses are still grappling with some of its finer points.
What’s likely more important, Glassman says, is the shot of confidence the bill provided.
“Businesses have to make a lot of decisions about long-term projects,” he said. “When you do something that clears the air for them for quite a while, it tends to be really dynamic. They might be more willing to do a project right now if the message from the tax reform is telling them it’s going to get easier to do business.”
The Federal Reserve committee that uses a benchmark short-term interest rate to set monetary policy shares the business optimism. According to minutes of the panel’s January meeting, most said the tax cut, low interest rates, and a better global outlook are likely to fuel economic growth.
Yet, business leaders’ concerns about maintaining a qualified staff are growing, reflecting an unemployment rate that’s hovered at 4.1 percent for four months and hourly wage growth inching closer to 3 percent.
Approximately 54 percent of executives surveyed said they’re grappling with a limited supply of talent, up 10 points from a year ago, as the most senior members of an aging workforce move into retirement and take skills with them that took a career to develop.
In tandem with those concerns, some 22 percent of the middle-market executives who expect to benefit from the 2017 tax cuts say they’ll hire more workers, while 33 percent say they’ll be giving pay raises.
Small firms voicing their concerns account for a little less than half of private-sector jobs, according to the Small Business Administration, and well over half of employment growth.
People “tend to think that when you cut taxes for companies, only companies benefit,” Glassman noted. Instead, businesses across the board are sharing the gains through pay hikes, including drugstore chain CVS and retail giant Walmart, and bonuses.
“It’s good news for younger workers,” Glassman said. “There’s growing pressure for companies to try to figure out ways to get people in, train them and give them the skills they need.”
