Presidential elections are a big deal. They reinforce the policies of the current administration or bring in a completely different management team. The year 2024 produced a turnover of management, and a new team will get to set the rules for the next four years. For small business owners, who operate in just about every facet of the economy, this means a lot of adjustments. Overall, small business owners viewed the change as positive. The NFIB Small Business Optimism Index posted a sharp increase, rising to 105.1 (s.a., 1986=100), close to the 105.9 spike reached in January 2017 after Trump’s first election. For the 10 months prior to the election, the Index averaged only 91, well below the 51-year average of 98.
In October, just before the 2024 election, the percent of owners expecting business conditions to improve over the next six months was just 12% while nearly twice as many (22%) expected worse conditions (Table 1). After the election (December’s data), 44% expected better business conditions in 2025 while only 10% expected worse, a massive reversal of 44 percentage points (from a net -10% in October to +34% in December). Firms in the manufacturing and wholesale services industries exhibited the smallest imbalance (3 points) while owners of professional service firms were the most pessimistic (net “better” was -19 points) but showed the most positive response to the election, with the net percent expecting “better” rising to +57%. Construction firms ranked second, with a net 44% expecting “better,” up from -8% in October.
Just about every owner probably wishes for a better economy based on their expectations for a different set of policies from the new management team (or external events such as wars or industry issues). If they don’t experience a more supportive path forward, the impact on economic growth will drag them into a different mode. But as it stands, it’s hard to ignore lines of customers and depleted inventory stocks. A majority of owners will start 2025 optimistically and let the facts inform their expectations and their actions moving forward.
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