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Survey: Businesses Bracing For Recession While Reversing Pandemic Cuts

Business owners’ concerns about U.S. economy have increased significantly since fall 2022, according to a new Nationwide survey

COLUMBUS, OH – Small and mid-sized business owners, like most American consumers, are increasingly concerned about economic conditions in the U.S., with two-thirds of them expecting a recession in the next six months, according to new data from Nationwide. Of those who expect a recession, more than 70% say it will be similar or even worse than the Great Recession of ‘07 – ’09.

Just 19% of small business owners and 39% of mid-market business owners rate business conditions in the U.S. economy positively, down 8 points and 19 points, respectively, since September 2022.

Inflation, interest rates top of mind
Persistent inflation and rising interest rates continue to impact their businesses, with nearly three quarters of small and mid-size business owners citing inflation as their most significant challenge, up 11 points since September 2022.

  • Increased interest rates are right behind with 62% of mid-market business owners and 50% of small business owners saying it’s a continued challenge (up 4 points and 15 points, respectively, from fall 2022).

Despite their grim views of the economy, most business owners (small-55%; mid-market-74%) are surprisingly optimistic about their own business operations.

  • 74% of mid-market and 55% of small business owners rate their business conditions as good or excellent.

Returning to pre-pandemic practices
Business owners are even reversing some actions taken over the course of the pandemic, including:

Hiring more, laying off less:

  • 21% of small businesses owners say they have hired more workers, up 8 points from the fall.
    • Only 6% of small businesses have laid off employees, a drop of 4 points from the fall.
  • 42% of mid-market owners have hired new workers, an 18-point jump.
    • 18% of mid-market businesses conducted layoffs within the past 6 months, down 5 points from the fall.

Managing supply chain disruptions:

  • 21% of small businesses say supply chain disruptions are among their biggest challenges, a drop of 8 points from the fall.
  • 31% of mid-market businesses list supply chain disruptions as one of their biggest challenges, consistent with their responses from the fall.

Staying open longer:

  • Only 10% of small business owners have reduced operating hours – down 7 points from the fall.
  • 14% of mid-market owners have reduced operating hours, a decrease of 11 points.

These positive indicators demonstrate that business owners may be finding their footing in some areas as they continue to navigate inflation effects and rising interest rates.

  • Cutting costs remains a top priority for business owners (63% small business; 49% mid-market) as they hedge where they can to minimize risk.

“Business owners are closely analyzing today’s economic uncertainty, but they’re also confident in their operations as they manage through the conditions to best meet demand and remain competitive,” says Russ Johnston, President of Business Insurance at Nationwide. “As business owners navigate the tight labor market to add staff, get back to traditional operating hours and explore cost-saving strategies, it is imperative that they review risk and ensure the business does not compromise on long-term protection.”

Lingering economic factors: bank failures and continued interest rate pressures
As business owners look ahead, they should also be diligent with their financial planning - especially as worries about the health of the banking system remain and interest rate uncertainty continues.

  • The majority of business owners, small (71%) and mid-size (80%), are concerned about the health of American banking institutions following the recent bank failures. Almost 3 in 10 business owners have reevaluated where their business banks.
  • Four in 10 small (46%) and mid-sized businesses (40%) feel the Federal Reserve should cut interest rates to ease pressure on the economy, while 13% and 23%, respectively, think the Federal Reserve should be more aggressive in raising rates.

These unknowns mean that businesses could be impacted yet again by heightening interest rates and be forced to halt hiring or lay off workers, reversing the progress they’ve made since emerging from the COVID economy.

“It's understandable for business owners to be focused on getting through today’s inflationary and recessionary environment. However, the past few years have taught us how crucial it is to hedge against risks and prepare for unforeseen threats,” said Juan José Pérez, President of the Nationwide Corporate Solutions organization. “Business owners have enough on their plates today, so we encourage them to partner with financial advisors and other risk management partners who can help them navigate today’s uncertainty and be prepared to take advantage of opportunities to grow their business when the recessionary environment eventually passes.”  

More findings from Nationwide's 2023 Economic Impact survey can be found here.

Survey methodology:
Nationwide commissioned Edelman Data & Intelligence to conduct a 15-minute quantitative online survey among a national sample of 400 U.S. small business owners and 400 mid-market business owners between March 30 and April 28, 2023. As a member in good standing with The Insights Association as well as ESOMAR Edelman Data and Intelligence conducts all research in accordance with local, national and international laws as well as in line with all Market Research Standards and Guidelines.

About Nationwide

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities, mutual funds and ETFs; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.