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On Economy, Wall Street Sulks as Main Street Exults

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It makes sense that anxiety about the economy is at a peak on Wall Street, since the market is at an all-time high and the conventional wisdom holds that bull markets climb a “wall of worry.”

Indeed, a Monday research note from Bank of America Merrill Lynch well captures this fear, calling for investors to boost their cash reserves and gold ownership, and warning: “…[T]he investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes,” quotes Bloomberg.

But far down from the economy’s commanding heights and toward its grassroots—the 90%-plus of U.S. businesses which have five or fewer employees—sentiment is quite cheerful.

That is the finding of a new economic sentiment indicator that the same Bloomberg will be releasing on a monthly basis, starting now, in conjunction with Thumbtack.com, a site that helps consumers get bids from its network of over 150,000 local painters, math tutors and even financial advisors.

The partnership seeks to exploit Thumbtack’s unique access to Main Street’s mom and pop business owners.

“We are excited to be able to reveal this new survey, which will capture the sentiment of over ten thousand small service providers nationwide on a monthly basis,” said Jon Lieber, Chief Economist of Thumbtack, in a statement.

“Many of these businesses have few or no employees, and are often overlooked in other widely tracked business surveys. We hope by drawing attention to them we can offer new insights into what’s happening in a part of the American economy that is difficult to study.”

And what’s happening on Main Streets across America—but most particularly in the South and Midwest, the survey reveals—is largely positive right now.

The new survey reflects an economy in recovery, with 25% fewer businesses citing “uncertain economic conditions” as their chief worry for the future and more than 80% of business owners expecting increased revenue in the next three months.

The debut survey—for the month of April—found the cheerful outlook spread across the country, though the positivity was more muted in the West and Northeast.

Thumbtack’s large user base provides meaningful sample sizes for states and cities, so survey users seeking business sentiment information can drill down to the local level, and even by industry.

So, for example, a few clicks can tell you that Georgia businesses are the most upbeat in the nation (70%), with 87% of owners anticipating an improved financial outlook in the next three months, though business owners are about equally divided in their confidence about being able to pass on their own increased costs to customers (about 30% each thinking they can do so or not do so).

Survey users can hover over other criteria to get grass roots sentiment on the ease of obtaining loans, making new hires, profitability expectations and more.

Survey users can also apply industrial and demographic filters, seeing for example that fully 100% of events industry business owners in Idaho report they have not sought to hire full or part-time staff in the past three months.

Indeed, a nice feature of the Thumbtack survey is its invitation to business owners to provide anonymous commentary, such as the lament from a wedding cake maker in Blackfoot, Idaho that “The economy is making everything hard. Our customers are spending less and trying to be frugal. Our products are luxuries and are not needs. It makes it hard to make sales and keep customers.”

But things are looking brighter for an accountant in Fort Myers, Florida, who reports:

“Business has been slowly rebounding for years and the current stock market should improve things again for the Florida tourist industry which has a positive effect on most local businesses.”

Currently, Memphis, Tennessee, is the city ranked highest in business sentiment. The funk has apparently lifted from the home of the blues. Perhaps it is the city’s business owners’ high outlook for profitability has tickled them pink. Among its professional services sector, which includes financial advisors, 43% foresee net earnings after taxes to rise by over 10% in the coming three months, and 57% see a rise of under 10%; no survey respondents expect profits to remain the same or decline.

Maybe that’s what’s bothering Wall Street after all. The aforementioned Bank of America Merrill Lynch research report, quoted more fully by the ZeroHedge blog, says that “investors are unambiguously positioned for the U.S. consumer to once again lead the global recovery.”

But, the firm’s research analysts worry: “Should U.S. consumption, profits and payrolls … continue to disappoint, equity valuations will be forced to cheapen.”