Hope on the Horizon: What’s Next for Small Business in a Changing Economy?

Highlights:

• Small businesses are demonstrating resilience amidst economic challenges such as tighter lending, slower consumer spending, and a cooling job market.
• Despite these pressures, loan defaults and delinquency rates for small businesses remain low, and there's optimism for a future economic rebound driven by healthy wage growth and increased household savings.

The latest Main Street Lending Report shares the latest small business lending data and trends in this unpredictable economy. 

This month, we see that despite tighter lending, slower consumer spending, and a cooling job market, small businesses remain resilient with low default rates and potential support from improving economic indicators.

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Lending Tightens, But Defaults Stay Low

Small businesses are finding it harder to get approved for loans. Banks and lenders are being more careful, which makes it tougher for owners to access funding. There is some good news: Loan defaults have dropped, and delinquency rates are staying steady. That means many small businesses are still keeping up with their payments, even under pressure.

Shoppers Are Spending Less

Consumers are becoming more cautious. People are spending less overall, and recent data shows slower growth in retail sales — the weakest since 2020. While there’s always the potential for a shift, this reflects a broader trend of consumers tightening their budgets, which could affect small businesses in many industries.

The Job Market Is Slowing Down

The labor market is also showing signs of slowing. Most of the new jobs are in just a few industries, like state and local government, healthcare, and social assistance. Unemployment claims are going up, and it's taking longer for people to find work. However, this could help small businesses who’ve been struggling to hire, as more people are now available and looking for jobs. 

Looking year-over-year, the leisure and hospitality industry appears to have been hardest hit by unemployment, though a seasonal increase in the summertime could be coming soon. Looking at month-over-month data, the public sector and private education have seen job numbers decline significantly. 

Looking Ahead: Reasons for Optimism

Even though the economy has been uneven lately, many experts expect it to bounce back. Wages are growing at a healthy pace, and households are saving more. These signs could lead to stronger consumer activity, which would be a welcome boost for small businesses everywhere.

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